Court of Appeal for Ontario
Date: August 7, 2019 Docket: C65230 Judges: Doherty, MacPherson and Benotto JJ.A.
Between
Her Majesty the Queen Appellant
and
Kevin Ekow Plange Respondent
Counsel
David Quayat, for the appellant Darren Sederoff, for the respondent
Heard: July 3, 2019
On appeal from the sentence imposed on March 20, 2018 by Justice Shaun S. Nakatsuru of the Superior Court of Justice.
Benotto J.A.:
[1] Overview
[1] The Crown appeals the sentence imposed following the respondent's guilty plea to a $41 million fraud. The Crown submits that the sentencing judge erred: (i) in striking down the mandatory minimum; and (ii) by imposing a sentence that was demonstrably unfit.
[2] Overview
[2] The respondent pleaded guilty to one charge of fraud over $5,000. The charge alleged:
THAT HE, the said KEVIN EKOW PLANGE, between August 13, 2013 and July 28, 2014, in the City of Toronto, in the Toronto Region, and elsewhere in the Province of Ontario, by deceit, falsehood or other fraudulent means unlawfully did defraud or attempt to defraud the Government of Canada of money in an amount greater than five thousand dollars ($5,000), by preparing and submitting false RC366 E Direct Deposit Request – GST/HST, Payroll and/or Corporation Income Tax Forms to the Canada Revenue Agency to change the direct deposit information of corporations, and as a result re-directed or attempted to re-direct Goods and Services Tax refunds and other payments properly payable to corporations, to bank accounts controlled by him, thereby committing an offence contrary to Section 380(1)(a) of the Criminal Code of Canada, as amended.
[3] The guilty plea proceeded on an Agreed Statements of Facts. In the Agreed Facts, the respondent acknowledged that he had redirected GST refunds, properly payable by the Canada Revenue Agency ("CRA") to various corporations, to bank accounts he controlled. In total, $41,831,073 were directed into his accounts by the CRA. The respondent managed to get only about $15,000 out of the accounts. Because the subject-matter of the fraud exceeded $1 million, the respondent was subject to the two-year mandatory minimum jail sentence provided for by s. 380(1.1).
[4] The respondent argued that the mandatory minimum punishment was unconstitutional as applied to him and unconstitutional as applied in certain reasonable hypotheticals. The trial judge rejected the first submission but accepted the second. He declared the mandatory minimum unconstitutional and s. 380(1.1) of no force and effect.
[5] The trial judge went on to impose a sentence of 13 months, 18 days (18 months reduced for credit for presentence custody and presentence bail conditions) to be followed by two years' probation.
[6] The Crown appealed. The Crown argued that the mandatory minimum did not constitute cruel and unusual punishment. The Crown further argued that regardless of the constitutionality of the mandatory minimum, the sentence imposed on the respondent was manifestly inadequate.
[7] At the end of oral argument, the court advised the parties that the decision on the constitutional question would be reserved. However, the court indicated that the sentence imposed was manifestly inadequate. A sentence of three years should have been imposed. The court further advised the parties that it was not in the interests of justice to re-incarcerate the respondent at this time and that the court would not do so. Finally, the court advised the parties that written reasons would follow. These are the reasons.
[3] The Facts
[8] Taxpayers, including corporations, who are entitled to refunds or rebates on various taxes can arrange to have the funds deposited directly into their bank accounts by the CRA. The user-friendly process established by the CRA requires only that the taxpayer file a form (Form RC366), directing that the funds be deposited into the specified bank account. The form is available on the CRA website.
[9] Between August 2013 and July 2014, the respondent filed 28 fraudulent RC366 Forms, purporting to change the direct deposit information for 12 major corporations. He directed that the funds be deposited into his own account at the TD bank, or accounts at other banks he set up for the purpose of receiving the funds.
[10] In completing the RC366 Forms, the respondent used information such as corporate addresses and business numbers. He also forged the signatures purporting to confirm the certification of a corporate officer or director authorizing the change in the bank account into which the funds were to be deposited.
[11] The respondent filed his first group of fraudulent Forms in early August 2013. Those Forms directed the funds to his personal bank account at the TD Bank. Within a month, several deposits from the CRA, totalling almost $6 million, had been made into his account. More deposits followed in October, totalling over $15 million. Another $15 million was deposited in December. The respondent could not, however, access these funds as the TD bank froze them.
[12] In early 2014, the respondent filed another batch of fraudulent RC366 Forms. With this batch, however, he changed his process. By using different banks and multiple accounts he sought to circumvent the banks' oversight. More than $5 million was deposited by the CRA. Despite ongoing and persistent efforts to free up funds, both by repeated calls to his banks and by many calls to the CRA seeking information that could facilitate access to the funds, the respondent only managed to get $15,290 out of the accounts. The scam ended in April 2014.
[13] The respondent testified at the sentencing hearing. The trial judge also had the benefit of a lengthy and favourable presentence report. The respondent described his year-long effort to fraudulently divert funds from the CRA to his own bank accounts as "an impulsive response to learning about a tax loophole". Despite this entirely self-serving and inaccurate description of his conduct, the trial judge accepted that the respondent was remorseful and had taken full responsibility for his actions.
[14] In his evidence, the respondent attempted to explain his fraudulent conduct by referencing very large gambling debts he had accumulated. The respondent told the judge that he intended to pay off his gambling debt with the proceeds of his fraud. The trial judge found that the respondent did not commit the offence to pay off his debts, but, like most fraudsters, was motivated by greed.
[4] Analysis
[15] I begin with a consideration of the mandatory minimum punishment for fraud over one million dollars and then turn to the fitness of the sentence.
Mandatory Minimum Punishment
[16] Section 380(1.1) of the Criminal Code provides that a person convicted of fraud exceeding one million dollars is subject to a mandatory minimum punishment of two years.
[17] The respondent submitted before the sentencing judge that this provision violated s. 12 of the Canadian Charter of Rights and Freedoms because it constituted cruel and unusual punishment.
[18] Section 12 of the Charter reads:
Everyone has the right not to be subjected to any cruel and unusual treatment or punishment.
[19] The sentencing judge followed the two-step analytical approach to s. 12 claims: R. v. Nur, 2015 SCC 15, [2015] 1 S.C.R. 773, at paras. 43-46; R. v. Boudreault, 2018 SCC 58, 429 D.L.R. (4th) 583, at para. 46; see also R. v. J.L.M., 2017 BCCA 258, 353 C.C.C. (3d) 40 at para. 16; R. v. Forcillo, 2018 ONCA 402, 141 O.R. (3d) 752, at para. 124; R. v. Morrison, 2017 ONCA 582, 136 O.R. (3d) 545, at para. 117, rev'd on other grounds, 2019 SCC 15.
[20] At the first step, the sentencing judge determined that the mandatory minimum sentence would not be grossly disproportionate for this offender. He then moved to the second stage to consider whether the sentence would be grossly disproportionate for other offenders. Here, he identified three reasonable hypotheticals:
A mortgage fraud involving a self-employed offender who overstates income or financial worth to obtain a $1 million mortgage. The overstatement is not significant. In the offender's eyes the financial statement was not dishonest because the self-employment income was based upon an aberrant year when income dipped from regular levels due to some unusual event such as illness. The sentencing judge found that to sentence this offender who had no prior criminal record to a penitentiary term would shock the conscience of the community.
A situation where a young college student impulsively submits one change of a corporation's direct deposit information to the CRA. He does it for pure curiosity to see if it would work, or even out of altruism to uncover a defect in the system. The offender has no idea how much would be re-directed to his bank account if it does work. To his surprise, $1 million is deposited. He is shocked, remorseful, and immediately calls the bank to advise that this was a mistake. The sentencing judge found that a two-year sentence would be grossly disproportionate given the nature of the offence and the minimal moral blameworthiness of the offender.
A situation where the spouse of the accused, knowing what the accused was going to do, permitted the use of their joint bank account to receive any direct deposits from the CRA. As a party, the spouse too would be sentenced to a mandatory minimum sentence of two years.
[21] The sentencing judge concluded that in these reasonable hypotheticals, the moral blameworthiness of the offender is significantly diminished, and, assuming the offender makes full restitution, no actual economic harm is caused. Consequently, it would outrage the standards of decency and shock the conscience of the community to impose a two-year sentence.
[22] Having made this determination, the sentencing judge then determined that the impugned provision breached s. 12 of the Charter and was not saved by s. 1.
[23] The appellant submits that the sentencing judge erred by considering these three hypotheticals. The first two do not amount to fraud and the third does not establish a reduced moral blameworthiness such that the mandatory minimum would shock the conscience of the community.
[24] The offence of fraud requires the Crown to show that an accused has committed a dishonest act, by deceit, falsehood or other fraudulent means, and that a deprivation has been caused by the prohibited act. The deprivation may consist in actual loss or placing a victim's pecuniary interests at risk: R. v. Théroux, [1993] 2 S.C.R. 5, at p. 20. The mens rea for fraud requires the specific intent to deceive, lie, or commit some other fraudulent act.
[25] The mens rea for fraud excludes from its ambit negligent misrepresentation, misstatement or improvident business conduct. An act of deceit made carelessly or as a prank when the person has no knowledge that the property of others would be put at risk is not fraud. Fraud is a "deliberately practiced fraudulent act which, in the knowledge of the accused, actually put the property of others at risk": Théroux, at p. 26.
[26] The first hypothetical invoked by the sentencing judge involves a self-employed individual who "fudges" income to correct for an aberrant year so as to qualify for a million-dollar mortgage. This hypothetical does not amount to fraud and is not reasonable. Fraud involves intentional dishonesty. In constructing the hypothetical, the trial judge assumes the putative offender commits fraud, but goes on to state that the putative offender does not see the financial statement as being dishonest. This shift in the hypothetical removes the example from the ambit of criminal fraud. The accused in this hypothetical intended no dishonesty.
[27] The second hypothetical is also problematic. The young college student who submits the same forms as the respondent out of curiosity or altruism has not intended to deceive or put the property of others at risk. This hypothetical lacks the mens rea to establish fraud. It is also, in my view, far-fetched.
[28] The hypothetical involving the spouse of an accused such as the respondent who allows the accused to utilize their bank account to perpetrate the fraud is unconvincing. If, as the hypothetical suggests, the spouse has full knowledge of the fraud and agrees to provide a bank account to facilitate the scheme, there is no principled reason why the mandatory minimum should not apply. Party participation is not a reason to lower a sentence from that of the principal.
[29] In my view, the judge's use of these hypotheticals to declare the section unconstitutional was in error. Therefore, the mandatory minimum punishment – on this basis – cannot be struck down and the appeal must be allowed. The question then becomes whether this court should create a hypothetical of its own in order to declare the section unconstitutional. This is where I part company with my colleague Doherty J.A. He agrees that the hypotheticals used by the sentencing judge do not lead to a declaration of unconstitutionality. However, he would construct a different hypothetical. I would not.
[30] I do not agree that it is this court's function in this case to construct a hypothetical in order to declare the mandatory minimum unconstitutional. I say this for three related reasons: (i) the onus is on the party challenging the validity of the legislation to establish the hypothetical; (ii) the parties, particularly the Crown, should have the opportunity to fully address the hypothetical; and (iii) there is no prejudice because the issue remains to be determined on a proper record in the future.
Onus
[31] The onus is on the party challenging the validity of a legislative provision to establish a reasonable hypothetical. This was confirmed by the Supreme Court of Canada in R. v. Goltz, [1991] 3 S.C.R. 485, at p. 520:
On the second aspect of the s. 12 analysis, the onus to demonstrate a reasonable hypothetical circumstance in which enforcement of the statute would violate s. 12 for imposing excessive or grossly disproportionate punishment remains with the party challenging the provision's validity. In the instant appeal, that onus was not discharged. Consequently, the challenge based on the second and hypothetical limb of the s. 12 inquiry must also fail.
[32] On this basis, the challenge with respect to the constitutionality of s. 380(1.1) must also fail.
[33] By placing the onus on the party seeking to challenge a mandatory minimum provision, the law ensures that the Crown and the court have an opportunity to fully examine the reasonableness of the hypothetical.
[34] I turn to my second reason: the importance of submissions.
Submissions Required
[35] When a legislative provision is challenged on the basis of its effect on a reasonable hypothetical offender, the parties, in particular the Attorney General, should have an opportunity to fully respond. As my colleague says, the hypothetical he relies on was put to the parties in oral submissions. However, the brief discussion did not relate to the reasonableness of the hypothetical but rather to the fact that the conduct would be captured by the mandatory minimum. The facts underlying the hypothetical were not vetted. This is significant since I – for one – am not convinced that the hypothetical discloses "opportunistic" or "spontaneous" conduct on the part of the hypothetical offender. Nor do I agree that it lacked sophistication. Quite the contrary. I do not accept, without submissions, that one could "come across" direct deposit instructions on the CRA website that could be used for a diversion of funds belonging to someone else. The fraud would involve multiple rather sophisticated and dishonest steps. A suitable corporation would have to be identified, the business number fraudulently obtained; a corporate search would be necessary to determine the proper name of the corporation and the names of the officers to be forged; the Form itself would have to be completed and filed. I raise these matters, not to conclude that the hypothetical is not reasonable, but rather to demonstrate why submissions would be necessary in order for this court to conclude that a two year prison sentence for this hypothetical offender would be grossly disproportionate.
[36] I agree with my colleague that to test the law, Nur (para. 63) requires the court to look at the offender and others. The issue here is not whether the court can consider reasonable hypotheticals; clearly it can. The issue is whether, on the facts of this case, this court should construct a hypothetical not considered by the court below, and not fully argued, in order to declare a legislative provision unconstitutional.
No Impediment to a Future Consideration
[37] Finally, I note that the issue of whether s. 380(1.1) breaches s. 12 of the Charter may be considered in a different context. As the Supreme Court said in Nur, at para. 71:
A court's conclusion based on its review of the provision's reasonably foreseeable applications does not foreclose consideration in future of different reasonable applications. [Citations omitted.]
[38] Consequently, I would allow the appeal of the constitutional ruling and set aside the trial judge's declaration that s. 380(1.1) of the Criminal Code is of no force and effect.
Fitness of Sentence
[39] The sentence imposed by the trial judge was demonstrably unfit when compared to other large-scale frauds.
[40] In R. v. Koval, [2001] O.J. No 1205 (S.C.), Watt J. (as he then was) found that large-scale commercial frauds attract sentences of 5-8 years where large sums of money are put at risk. In R. v. Watts, 2016 ONSC 4843, [2018] D.T.C. 5024, the court set a sentencing range of 4-8 years in a case involving a large-scale fraud where $10 million was put at risk and the accused obtained $150,000 from the fraud. The fraudulent scheme involved the filing of false tax documents. Other large-scale frauds implicating loss or risk of approximately $2-40 million dollars have attracted sentences of 3.5-8 years. More recently, this court confirmed that in cases of large-scale fraud the range is generally 3-5 years: R. v. Davatgar-Jafarpour, 2019 ONCA 353, at para 34.
[41] The sentencing judge also erred by characterizing the fraud in a manner that was not supported by the evidence, and mitigating the respondent's sentence on that basis. He reasoned that because the respondent's fraudulent scheme was "unique" and unsophisticated, this mitigated in favour of a lower sentence being imposed. The unique aspects of the fraud, according to the sentencing judge, are that it was accomplished simply by downloading a form available from the internet and filing it with the Canada Revenue Agency.
[42] This characterization is incomplete and understates the sustained effort made by the respondent to execute the fraud. The form itself reveals that there was significant research involved in completing it. It ignores the multiple attempts he made to access the money and the attempt to reconfigure his scheme to avoid detection. The sentencing judge understated the moral blameworthiness of the respondent.
[43] While the sentencing judge noted the importance of general and specific deterrence, the substance of his approach betrays the reference to deterrence. Instead of focusing on the efforts made by the respondent to advance the fraud, he focused on the lack of sophistication and the inevitable detection of the fraud.
[44] For these reasons, a sentence of 18 months was demonstrably unfit. I conclude that a fit sentence is three years.
[45] The respondent has served the sentence previously imposed so we turn to the issue of re-incarceration.
[46] This court has stated that when a fit sentence is determined to be higher than that already served, denunciation and general deterrence may be achieved without re-incarceration: see R. v. Dufour, 2015 ONCA 426, 326 C.C.C. (3d) 52.
[47] The respondent's rehabilitation demonstrates that this case does not require re-incarceration to uphold the sentencing principles. For this reason, as stated at the outset of these reasons, the court advised the parties that it would stay the remainder of the sentence.
Conclusion
[48] I would allow the appeal, impose a sentence of three years with the proviso that it is not in the interests of justice to re-incarcerate the respondent at this time and I would stay the remainder of the sentence.
"M.L. Benotto J.A."
"I agree J.C. MacPherson J.A."
Doherty J.A. (Concurring):
[49] I have read the reasons of my colleague, Benotto J.A. I agree entirely with her analysis of the fitness of the sentence (paras. 38-46) and her proposed disposition of the appeal (para. 47). I would add only that, absent the impressive array of mitigating factors which included a guilty plea, the small loss suffered by the CRA, full restitution, the respondent's youth, and his first offender status, a significantly longer sentence would have been necessary.
[50] I part company with my colleague, however, on the constitutional question. In my view, this court should address the merits of the constitutional argument. I agree with the trial judge that the two-year mandatory minimum in s. 380(1.1) does amount to cruel and unusual punishment, and that the section should be declared of no force or effect.
The Section 12 Analysis
[51] The Supreme Court has repeatedly stressed that the requirement that the sentence be "grossly disproportionate" sets a high constitutional bar. Sentences that are merely excessive or disproportionate so as to warrant appellate intervention on a sentence appeal do not necessarily rise to the level of cruel and unusual punishment: Nur, at para. 39; R. v. Lloyd, 2016 SCC 13, [2016] 1 S.C.R. 130, at para. 24; R. v. Morrisey, 2000 SCC 39, [2000] 2 S.C.R. 90, at para. 26; R. v. Serov, 2017 BCCA 456, at para. 24. For example, the trial judge correctly acknowledged that an 18-month sentence, the sentence he regarded as fit for the respondent, would not render the two-year mandatory minimum sentence grossly disproportionate as applied to the respondent.
[52] In addition to reaffirming the two-step approach to the analysis of a s. 12 claim, Nur reiterates that the analysis must be applied first to the offender and, if the mandatory minimum as applied to the offender does not offend s. 12, to other putative offenders, referred to as "reasonable hypotheticals", who might reasonably be caught by the provision: Nur, at paras. 47-65; Forcillo, at para. 125.
[53] Constitutional review that extends beyond the circumstances of the specific case and the specific offender is not unique to s. 12. A person who is subject to a law can challenge the constitutionality of that law, even if the law does not infringe that person's constitutional rights: see R. v. Big M Drug Mart, [1985] 1 S.C.R. 295, at p. 314. McLachlin C.J., in Nur, offers an eloquent explanation for the need to go beyond the circumstances of the individual case when assessing the constitutionality of a law:
[63] Not only is looking at the law's impact on persons whom it is reasonably foreseeable the law may catch workable – it is essential to effective constitutional review. Refusing to consider reasonably foreseeable impacts of an impugned law would dramatically curtail the reach of the Charter and the ability of the courts to discharge their duty to scrutinize the constitutionality of legislation and maintain the integrity of the constitutional order. The protection of individuals' rights demands constitutional review that looks not only to the situation of the offender before the court, but beyond that to the reasonably foreseeable reach of the law. Testing the law against reasonably foreseeable applications will prevent people from suffering cruel and unusual punishment in the interim until the mandatory minimum is found to be unconstitutional in a particular case.
[64] Refusing to consider an impugned law's impact on third parties would also undermine the prospect of bringing certainty to the constitutionality of legislation, condemning constitutional jurisprudence to a wilderness of single instances. Citizens, the police and government are entitled – and indeed obliged – to know what the criminal law is and whether it is constitutional. Looking at whether the mandatory minimum has an unconstitutional impact on others avoids the chilling effect of unconstitutional laws remaining on the statute books. [Emphasis added.]
[54] With respect to the contrary view, I do not accept an approach that limits a s. 12 claim to the circumstances of the specific offender and any reasonable hypotheticals advanced by the parties, or considered by the trial judge. While procedural fairness demands that the parties have a full opportunity to address any reasonable hypothetical on which the outcome of the constitutional challenge may turn, this court is obliged to consider any hypothetical it views as a reasonably foreseeable application of the mandatory minimum. The court cannot decline to consider reasonable hypotheticals on the basis that those same hypotheticals can be raised and considered in some future proceeding.
[55] The s. 12 analysis in this case focuses on the application of the mandatory minimum to reasonable hypotheticals. The respondent does not argue that a sentence of two years would be grossly disproportionate in the circumstances of his case.
[56] I will return to the reasonable hypothetical inquiry later in my reasons. Before doing so, however, it is necessary to address the elements of the crime of fraud and the relevance of the value of the subject-matter of the fraud to the gravity of the offence and the moral culpability of the offender.
The Elements of Fraud
[57] Fraud, as described in s. 380 of the Criminal Code, consists of voluntarily performing an act that is in the nature of a "deceit, falsehood or other fraudulent means." The prohibited act must result in actual pecuniary loss to the victim, or it must place the victim's pecuniary interests at risk: R. v. Théroux, [1993] 2 S.C.R. 5, at p. 20. The actus reus of the crime of fraud is captured by the phrase "dishonest detriment".
[58] The fault or mens rea component of the crime of fraud has two parts. The Crown must prove subjective knowledge of the prohibited act. Thus, in cases like this one, involving an allegation of a false representation, the Crown must prove that the respondent knew that the representation in the Forms to the effect that the identified corporations were redirecting the deposits to a different account was false. In addition to knowledge of the falsity of the representation, the Crown had to prove that the respondent knew that in doing the prohibited act he could cause actual pecuniary loss to the CRA, or could put the CRA's pecuniary interests at risk: Théroux, at p. 26. In other words, the Crown had to prove that the respondent knew that, by falsely redirecting the refunds into bank accounts he controlled, the CRA could lose those funds or, at a minimum, be put at risk of losing those funds. The Crown did not have to prove an intention to cause loss or risk of loss. It was sufficient if the Crown proved that the respondent was reckless as to that consequence: Théroux, at pp. 25-26.
[59] There is no doubt that the crime of fraud, first introduced into the Criminal Code in 1954 (S.C. 1953-54, c. 51, s. 323), captures a very broad range of activity and is designed to "encompass the entire panoply of dishonest commercial dealings": Théroux, at p. 24. Fraud, as defined in s. 380, creates a broad honesty-based criminal offence freed from the limitations and qualifications that had grown up over centuries around common law-based property crimes such as obtaining property by false pretenses. The courts have given the crime of fraud the very broad reading intended by the language of the section: see e.g. R. v. Olan, [1978] 2 S.C.R. 1175; see also J. Douglas Ewart, Criminal Fraud (Toronto: Carswell, 1986), at pp. 5-10.
[60] The long reach of the crime of fraud is important to the s. 12 analysis. Mandatory minimums that apply to offences that can be committed in many ways, in many different circumstances, and by a wide range of people are "constitutionally vulnerable" under s. 12 because, by virtue of their broad scope, they run the very real risk of capturing offenders for whom the mandatory minimum will be grossly disproportionate punishment: Lloyd, at para. 3; Forcillo, at paras. 126-27; Morrison, at paras. 117-19.
[61] If the two-year mandatory minimum applied to all crimes of fraud over $5,000, it could not survive s. 12 scrutiny. First offenders who plead guilty to fraud over $5,000 quite often do not go to jail at all, much less to the penitentiary for two years. It takes no imagination to envision reasonably foreseeable circumstances in which a sentence of two years for fraud over $5,000 would constitute a grossly disproportionate sentence. One need only read the reported cases.
The Reach of the Mandatory Minimum
[62] The mandatory minimum in issue does not apply to all frauds over $5,000. Subsection 380(1.1) provides that when a person is convicted of fraud, the court shall "impose a minimum punishment of imprisonment for a term of two years if the total value of the subject-matter of the offences exceeds one million dollars." The "value of the subject-matter of the offences" refers to the amount of the loss or risk of loss suffered by the victim.
[63] The question becomes – does limiting the mandatory minimum to frauds in which the loss or risk of loss is over $1 million adequately distinguish those frauds for which two-year sentences would not be grossly disproportionate from those frauds for which two years would be grossly disproportionate? Put somewhat differently, is the fact that the value of the subject-matter of the fraud exceeds $1 million a sufficiently aggravating factor on sentence that it overrides mitigating factors that could arise in reasonably foreseeable situations, to the extent that a two-year sentence in reasonably foreseeable cases of fraud over $1 million will never be grossly disproportionate.
[64] In examining proportionality, one looks to the relationship between the mandatory minimum and the penalty that would be imposed using the generally applicable principles of sentencing. Those principles focus on the gravity of the offence, the harm caused by the offence, and the blameworthiness of the offender's conduct. If the sentence commanded by the mandatory minimum is grossly disproportionate to the sentence that would be imposed using the generally applicable principles of sentencing, the mandatory minimum violates s. 12: Nur, at para. 44.
[65] The value of the subject-matter of the fraud has always been an important consideration in determining the gravity of the crime of fraud. Not only does s. 380 distinguish between the two levels of fraud based on the value of the subject-matter of the fraud (above or below $5,000), s. 380.1(1)(a) specifically provides that the magnitude of a fraud must be treated as an "aggravating circumstance" on sentence. The amount of the loss or risk of loss speaks directly to the magnitude of the fraud. By tying the mandatory minimum penalty to frauds that involve a very substantial loss or risk of loss, Parliament has connected the mandatory minimum to a factor that clearly identifies potentially serious frauds.
[66] The value of the loss or risk of loss can also reflect the harm caused by the offence. In cases in which the victim suffers an actual loss, there is a direct and strong correlation between the value of the loss and the harm caused. The greater the loss, the greater the harm. That connection is weaker when there is no actual loss, but rather a risk of loss. The level of risk sufficient to satisfy the detriment component of the actus reus of fraud runs along a continuum. Sometimes, the risk of actual pecuniary loss may be small: see e.g. R. v. Knowles (1979), 51 C.C.C. (2d) 237 (Ont. C.A.), at p. 241; see also Ewart, at pp. 121-33. In some reasonably foreseeable circumstances, the amount of the fraud will be over $1 million, but the actual risk of loss will be low and there will be no actual loss. In those cases, the harm flowing from the fraud will be minimal.
[67] The third factor relevant to proportionality in sentencing, the blameworthiness of the offender, may or may not have some correlation to the value of the subject-matter of the fraud. In most frauds, the offender will know, at least in general terms, the amount of the victim's loss or risk of loss. The offender's gain is often a reflection of the victim's loss. In those typical cases, the offender's understanding that the subject-matter of the fraud involves a large amount of money increases the blameworthiness of the conduct.
[68] There are, however, situations in which the value of the fraud does not contribute to the blameworthiness of the offender's conduct. Two points should be made. First, fraud does not require an intention to cause loss or risk of loss to anyone. Recklessness will suffice. Some fraudsters firmly believe that everyone will be better off financially after the fraud is perpetrated.
[69] Second, and this is particularly significant in assessing blameworthiness, the amount of the fraud plays no role in determining liability for the offence. The Crown is not required to prove that an accused was aware of, or even turned her mind to, the amount of the fraud or the amount put at risk by the fraud. Consequently, the value of the subject-matter of the fraud will, in some cases, say nothing about the blameworthiness of the offender's conduct. Indeed, on the agreed facts of this case, when the respondent filed the first batch of false RC366 Forms, he did not turn his mind to the amount of any deposits that might be redirected into his account.
The Reasonable Hypothetical
[70] Nur, at para. 62, describes reasonable hypotheticals as "grounded in judicial experience and common sense." Reasonable hypotheticals do not include far-fetched examples that marshal every conceivable mitigating factor in a combination that will never realistically arise in the real world. Reasonable hypotheticals do, however, include, not only circumstances that are likely to arise in the general application of the law, but also situations that may reasonably arise: Nur, at para. 68. Reasonable hypotheticals include personal characteristics of an offender such as age, or the absence of a criminal record, but again not constellations of mitigating personal circumstances that defy human experience: Nur, at para. 75.
[71] The trial judge referred to three hypotheticals. My colleague has examined each of them. I agree with much of what she says. The first two hypotheticals are cluttered with details that tend to render the criminality of the conduct questionable. Reasonable hypotheticals must present facts that clearly establish liability for the offence. I also agree with my colleague that on the limited facts offered by the trial judge in the third hypothetical, there is no basis to conclude that the mandatory minimum would be grossly disproportionate.
[72] I test the constitutionality of the mandatory minimum against a reasonable hypothetical that is a variation of the trial judge's second hypothetical. This variation is very close to the agreed facts in this case, as they apply to the first batch of fraudulent RC366 Forms filed by the respondent in August 2013. This hypothetical was put to counsel in the course of oral argument.
[73] Assume "A" comes across the CRA website and the instructions about direct-deposit banking. Although it seems too easy to be true, "A" decides to try to make some quick money by sending in one fraudulent RC366 Form, directing payment of certain tax rebates owed to a corporation into his account. He picks a company at random and sends in a fraudulent Form. "A" never turns his mind to the amount of any payment he might receive from the CRA. In fact, he assumes that the CRA must have some way of checking the information in the Forms and he doubts that his scheme will be successful.
[74] A few days later, "A" is shocked to see that the CRA has deposited $3 million into his bank account. At the same time, he learns that his bank has frozen the account pending inquiries.
[75] "A" quickly assesses his situation. He realizes, given the very large amount that has been deposited into his account, that he is potentially in very serious trouble. "A" also appreciates that, because of the actions of his bank, he will not be able to get any of the money out of the account, and the CRA will learn of his deception very soon. "A" decides to make the best of a bad situation. He goes to his bank and tells them that the money does not belong in his account and asks that they return it to the CRA. "A" also notifies the CRA. The police become involved. "A" pleads guilty to fraud and cooperates fully. He is a young first offender with strong community support and solid prospects.
[76] On the facts of the hypothetical, there is no question that "A" is guilty of defrauding the CRA. He knowingly made false representations, redirecting public funds from taxpayers to whom they were owed, to his account. He knew he was creating the risk that the CRA would suffer a pecuniary loss, even though he never turned his mind to the amount of that potential loss, and certainly did not anticipate anything like the amount that was deposited into his account. The CRA suffered no loss and, because of banking policies, any risk of pecuniary loss as a consequence of "A's" actions was minimal.
[77] In terms of "A's" blameworthiness, the conduct was deliberate and dishonest under any definition. However, it was, to a large extent, spontaneous and opportunistic. This was not a carefully, planned out, or sophisticated scheme. It was in fact bound to fail and when "A" realized that inevitability and the amount of money involved, he moved quickly to acknowledge his wrong and take responsibility for it.
[78] In my view, a trial judge sentencing "A" might reasonably conclude that, despite the many mitigating factors, the value of the subject-matter of the fraud, combined with the public nature of the funds, required a denunciatory sentence that included a jail sentence in the range of six to twelve months. Other sentencing judges might conclude that a jail term was unnecessary. However, a sentence of two years in the penitentiary is far beyond what is reasonably necessary to deliver that denunciatory message. A sentence of two years also grossly overstates the blameworthiness of "A's" conduct and the loss caused by his conduct. A jail sentence which is at least double the sentence at the outer limits of proportionality is properly characterized as grossly disproportionate.
[79] Mandatory minimum sentences alter the sentencing dynamic. That dynamic generally relies on sentencing judges to balance all relevant factors and impose a sentence within the very broad range set by Parliament that is tailored to the specific circumstances of the offence and the offender. Subject to constitutional restraints, Parliament is entitled to dictate sentencing policy by, for example, imposing mandatory minimums that favour general deterrence and denunciation over the individualization of the sentence. Section 12 of the Charter, however, limits Parliament's authority to sacrifice other sentencing principles in the name of deterrence and denunciation. Deterrence and denunciation cannot be achieved by the imposition of grossly disproportionate sentences. That strategy is constitutionally unacceptable: Nur, at paras. 44-45.
[80] In most cases, and this is certainly one of them, frauds involving over $1 million will attract sentences of two years or more. However, in some reasonably foreseeable circumstances, and I outlined one above, the two-year mandatory minimum will be grossly disproportionate. It follows that the mandatory minimum of two years set down in s. 380(1.1) is unconstitutional and should be declared of no force or effect.
Conclusion
[81] Like my colleague, I think a sentence of three years should have been imposed. However, having regard to all of the circumstances, and in particular, the fact that the Crown is not pressing for re-incarceration, I agree with my colleague that re-incarceration is not in the public interest.
"Doherty J.A."
Released: August 7, 2019 "D.D."
