Court of Appeal for Ontario

Date: 2017-09-27 Docket: C62578

Judges: Pardu, Huscroft and Fairburn JJ.A.

Between

Her Majesty the Queen Appellant

and

Brian Way Respondent

Counsel

Melissa Adams, for the appellant Timothy Breen, for the respondent

Heard: September 20, 2017

On Appeal

On appeal from the sentence imposed on August 8, 2016 by Justice Julie A. Thorburn of the Superior Court of Justice, sitting without a jury, with reasons for judgment reported at 2015 ONSC 3080 and reasons for sentence reported at 2016 ONSC 5052.

Reasons for Decision

[1] The Crown appeals the $20,000 fine in lieu of forfeiture imposed by the trial judge. The respondent concedes that the trial judge erred. In our view, that is an appropriate concession. On appeal, the respondent argues only that the income taxes paid on the proceeds of crime should be deducted from the calculation of the fine in lieu of forfeiture and asks for time to pay.

[2] The respondent was in the business of producing and selling child pornography. He funneled the revenue through a corporation over which he had sole control. The gross sales proceeds were $946,391.25. After some allowance for discounts given to purchasers, and a deduction for money already seized, the Crown and respondent agree that the sales of child pornography generated $797,809.47 in revenue.

[3] The trial judge considered the following factors to determine the fine in lieu of forfeiture:

a) The sales revenue from the child pornography films did not represent the benefit or advantage received by the respondent from his crime, or the amount he took under his actual control.

b) The respondent lived a modest life, had no significant assets, and there was no evidence that the sales revenues were hidden or transferred to third parties.

c) There was no evidence that he travelled, owned property, or transferred money beyond the reach of the courts.

d) The only benefit the respondent received from the sale of the 57 child pornography films and accompanying photographs was his salary from the corporation.

[4] The trial judge based the fine in lieu of forfeiture on the portion of the respondent's salary attributable to the production of child pornography. Since 57 of the 800 films produced by the corporation contained child pornography, the trial judge imposed a fine in lieu of forfeiture of approximately 1/16th of the total salary the respondent drew from the corporation over a 52 month period, with some small adjustments to reflect the production of other child pornography images and proceeds of crime already recovered by the Crown.

[5] The trial judge erred by calculating the fine in lieu of forfeiture in this manner.

[6] The corporation's gross sales proceeds of child pornography constituted a benefit or advantage that was indirectly derived from the commission of the offence. Moreover, s. 2 of the Criminal Code, R.S.C. 1985, c. C-46 defines property to include "property originally in the possession or under the control of any person". See also R. v. Dwyer, 2013 ONCA 34, 296 C.C.C. (3d) 193, at para. 24. As such, the gross sales proceeds amounted to proceeds of crime under s. 462.3(1) of the Criminal Code.

[7] The respondent had sole control over the $797,809.47. Where funds are no longer available, s. 462.37(3) of the Criminal Code provides that the court may order the offender to pay a fine "equal to the value of the property". As noted in R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 392, at paras. 31 and 34:

…where a sum of money is concerned, a reduction in the value of such property is most often associated with the use thereof, which is itself often associated with an absence of other income. If one of the objectives is to ensure that crime does not pay, use of the proceeds of crime must be a basis for ordering a fine instead of forfeiture of the property and cannot be a basis for mitigating the impact of the measure.

The limits on the court's discretion can be deduced from the objective and context of s. 462.37(3) Cr. C. They are also incorporated into the words of the provision itself. The court's discretion is limited not only by circumstances in which the substitution may be made, in particular those listed in paras. (a) to (e), but, even more importantly, by the clear words of the provision itself. The amount of the fine is established by the Criminal Code: the court "may, instead of ordering that property … to be forfeited …, order the offender to pay a fine in an amount equal to the value of that property …". The words are crystal clear. Parliament has itself determined the amount of the fine.

[Emphasis in original.]

[8] For the same reasons, it would be inappropriate to deduct the income tax paid on the income derived from the sale of child pornography from the proceeds of crime subject to forfeiture in this case. As Fish J. stated in his partial dissent in R. v. Craig, 2009 SCC 23, [2009] 1 S.C.R. 762, at para. 122: "Subjecting forfeiture to the lien of the revenue authorities would have allowed her [the appellant] to discharge the tax indebtedness arising from her criminal activities out of her interest in a property subject to forfeiture as a result of those very same crimes. As a matter of principle, Ms. Craig should not be permitted to do so."

[9] Accordingly, leave to appeal the sentence is granted, the Crown's appeal is allowed, and the trial judge's order for a fine in lieu of forfeiture in the sum of $20,000 is vacated. A fine in lieu of forfeiture in the sum of $797,809.47, an agreed amount, is substituted.

[10] The respondent requests time to pay the fine in lieu of forfeiture. Having regard to the amount of the fine, the respondent will have eight years from the expiry of the global sentence of imprisonment imposed by the trial judge to pay it. In default of payment of the fine in lieu of forfeiture, the respondent is sentenced to four years incarceration pursuant to s. 462.37(4)(vi) of the Criminal Code, consecutive to the trial judge's sentence of imprisonment.

"G. Pardu J.A."

"Grant Huscroft J.A."

"Fairburn J.A."