Her Majesty the Queen v. Dobis

[Indexed as: R. v. Dobis]

58 O.R. (3d) 536

[2002] O.J. No. 646

Docket No. C36429

Court of Appeal for Ontario

Moldaver, Feldman and MacPherson JJ.A.

February 25, 2002

Criminal law -- Appeals -- Missing transcript -- Accused's evidence at sentencing hearing not available due to malfunctioning equipment -- Crown not foreclosed from appealing sentence even though Criminal Appeal Rules require that evidence at sentencing hearing must be filed on appeal -- Test whether serious probability of error in unavailable transcript or accused deprived of ground of appeal -- Accused not seeking to adduce fresh evidence setting out substance of his evidence at sentencing hearing -- Accused not prejudiced by missing transcript -- Ontario Court of Appeal Criminal Appeal Rules, SI/93-169, Rule 8.

Criminal law -- Fraud -- Sentence -- Accused stole $286,636 from his employer and defrauded employer of $1.9 million over three-year period while employed as accounting manager -- Accused engaged in fraud because he was in turn being victimized by notorious Nigerian mail scam -- Offences had devastating impact on accused's employer -- Trial judge imposed conditional sentence of two years less a day -- Crown's appeal allowed -- Penitentiary sentence generally appropriate in cases of large-scale fraud committed by persons in position of trust with devastating consequences for victims -- Appropriate sentence at time of sentencing would have been in range of three to five years' imprisonment -- Accused given credit for having served 91/2 months of conditional sentence -- Custodial sentence of two years less a day imposed.

The accused pleaded guilty to fraud over $5,000 and theft over $5,000. He was employed by the victim as its accounting manager. Ten months after being promoted to that position, he started writing company cheques payable to himself, his corporation or his stock brokerage accounts. The total amount stolen over a period of almost three years was $286,636.50. These transactions formed the basis of the theft charge. At the same time, the accused became involved in a Nigerian mail fraud and obtained the money to forward to the Nigerian fraudsters by defrauding his employer of $1.9 million. The offences had a devastating effect on the victim, a mid-sized family company. The survival of the company, and the jobs of 250 people, were in jeopardy. The accused was a first offender. The trial judge imposed a conditional sentence of two years less a day. The Crown appealed.

Held, the appeal should be allowed.

Part of the transcript of the sentence hearing was missing due to malfunctioning recording equipment. The submissions of both counsel and the trial judge's reasons for sentence were recorded. While Rule 8 of the Criminal Appeal Rules states that the transcript shall include the entire hearing before the court, Rule 8 should not be interpreted strictly so as to preclude a sentence appeal where part of the transcript is missing due to an accident. The essential question is whether the accused is prejudiced on the appeal because of the missing transcript. In the circumstances of this case, neither party was prejudiced.

The accused's conduct and its consequences were extremely serious. The offences involved a good deal of planning, skill and deception. The victims of the offences suffered terribly. Moreover, at least from the accused's perspective, there was a second intended victim of the Nigerian letter scam, the Government and people of Nigeria. If the scheme had been real, U.S. $35 million would have been removed from Nigeria and its people and the accused would have pocketed more than U.S. $10 million. The circumstances of the offences required the imposition of a penitentiary sentence in the range of three to five years. While there are fraud cases in which a reformatory sentence has been upheld or imposed by the Court of Appeal, each of those cases had important mitigating or differentiating factors that were not present in this case. There is a real need to emphasize denunciation and, especially, general deterrence, in the realm of large-scale frauds committed by persons in positions of trust with devastating consequences for their victims. The accused had served 9 1/2 months of his conditional sentence. He should be given full credit for this in light of the fact that the conditions imposed by the trial judge for the first 12 months of the conditional sentence almost amounted to house arrest. The sentence was varied to two years less a day in custody.

APPEAL by the Crown from sentence for fraud and theft.

R. v. Hayes, 1989 108 (SCC), [1989] 1 S.C.R. 44, 89 N.S.R. (2d) 286, 89 N.R. 138, 227 A.P.R. 286, 48 C.C.C. (3d) 161, 68 C.R. (3d) 245, apld R. v. McEachern (1978), 1978 2506 (ON CA), 42 C.C.C. (2d) 189, 7 C.R. (3d) S-8 (Ont. C.A.); R. v. Pierce (1997), 1997 3020 (ON CA), 32 O.R. (3d) 321, 114 C.C.C. (3d) 23, 5 C.R. (5th) 171 (C.A.) [Leave to appeal to S.C.C. refused (1997), 224 N.R. 154n]; R. v. Underys, [1999] O.J. No. 4372, distd Other cases referred to R. v. Bertram (1990), 40 O.A.C. 317 (C.A.); R. v. Bunn, 2000 SCC 9, [2000] 1 S.C.R. 183, 142 Man. R. (2d) 256, 182 D.L.R. (4th) 56, 249 N.R. 296, 212 W.A.C. 256, [2000] 4 W.W.R. 1, 140 C.C.C. (3d) 505, 30 C.R. (5th) 86; R. v. Foran, 1969 209 (ON CA), [1970] 2 O.R. 52, [1970] 1 C.C.C. 336 (C.A.); R. v. Gray (1995), 1995 18 (ON CA), 76 O.A.C. 387 (C.A.); R. v. Holden, [2000] O.J. No. 3481; R. v. M. (C.A.), 1996 230 (SCC), [1996] 1 S.C.R. 500, 194 N.R. 321, 105 C.C.C. (3d) 327, 46 C.R. (4th) 269; R. v. Montemurro, unreported, June 21, 1984; R. v. Proulx, 2000 SCC 5, [2000] 1 S.C.R. 61, 142 Man. R. (2d) 161, 182 D.L.R. (4th) 1, 249 N.R. 201, 212 W.A.C. 161, [2000] 4 W.W.R. 21, 140 C.C.C. (3d) 449, 49 M.V.R. (3d) 163, 30 C.R. (5th) 1 (sub nom. R. v. P. (J.K.D.)); R. v. Ruhland (1998), 1998 6138 (ON CA), 123 C.C.C. (3d) 262 (Ont. C.A.); R. v. Scherer (1984), 1984 3594 (ON CA), 5 O.A.C. 297, 16 C.C.C. (3d) 30, 42 C.R. (3d) 376 (C.A.); R. v. Shropshire, 1995 47 (SCC), [1995] 4 S.C.R. 227, 129 D.L.R. (4th) 657, 188 N.R. 284 , 102 C.C.C. (3d) 193, 43 C.R. (4th) 269; R. v. Villanueva, [1999] O.J. No. 4939; R. v. Wismayer (1997), 1997 3294 (ON CA), 33 O.R. (3d) 225, 115 C.C.C. (3d) 18, 5 C.R. (5th) 248 (C.A.) Statutes referred to Criminal Code, R.S.C. 1970, c. C-34, s. 609(2) Criminal Code, R.S.C. 1995, c. C-46, s. 682(2) Rules and regulations referred to Ontario Court of Appeal Criminal Appeal Rules, SI/93-169, Rule 8

Gregory J. Tweney, for appellant. Richard N. Stern and Stephen Menzies, for respondent.

The judgment of the court was delivered by

MACPHERSON J.A.: --

A. INTRODUCTION

[1] The principal issue in this Crown appeal is the appropriateness of a conditional sentence for a large-scale fraud and theft involving over $2 million committed by a senior and trusted employee of a mid-size family company. A secondary issue is whether leave to appeal the sentence should be granted when part of the transcript of the sentence hearing is missing due to a malfunctioning of the recording equipment.

B. FACTS

[2] The respondent, Mark Dobis ("Dobis"), pleaded guilty to fraud over $5,000 and theft over $5,000 relating to money he misappropriated from a company where he was employed as its accounting manager. The trial judge imposed a sentence of two years less a day to be served in the community, plus probation for 18 months and a restoration order for $286,636.50. The Crown appeals this sentence. It seeks the imposition of a penitentiary sentence or, in the alternative, variation of the conditional sentence to a custodial sentence of the same duration.

[3] The facts can be briefly stated. Electro Canada Limited ("Electro Canada") is a Toronto-based company which manufactures electrical wiring assemblies for appliances and automobile computers. Craig Christie ("Christie") bought the company in 1979 when it had 20 employees. For the next few years, he and his wife worked hard at the company. By 1998, there were over 250 employees. In the same year, the company opened a second factory in Mexico in order to maintain its competitiveness in the NAFTA regime. In addition, Christie was nominated for the Entrepreneur of the Year Award in 1994 and the Ontario Ministry of Economic Development, Trade and Tourism designated Electro Canada an "Innovative Growth Firm" in 1997. By 1998, the year in which the fraud came to light, Christie described his company in these terms: "By then, Electro Canada and I were one in the same [sic], the Company was my identity, my financial security, my vocation and my avocation" (Victim Impact Statement, p. 1).

[4] Dobis joined Electro Canada as a payroll clerk in 1993 when he was 30 years old. In February 1994, he temporarily assumed the position of accounting manager. Within a month, the company promoted him to that position on a permanent basis. As accounting manager, Dobis was responsible for preparing the payroll, accounts receivable and accounts payable, and maintaining the company books.

[5] Just 10 months after becoming accounting manager, Dobis commenced his dishonest conduct. Between January 30, 1995 and December 24, 1997, Dobis wrote 21 company cheques made payable to himself, his corporation or his stock brokerage accounts. On each cheque, he forged Christie's signature because Christie was the only person in the company with signing authority. The amounts of the 21 cheques ranged from $7,500 to $24,530.75. In 1995, Dobis took about $25,000, in 1996 about $128,000, and in 1997 about $133,000. The total amount stolen was $286,636.50. These transactions formed the basis of the theft charge to which Dobis pleaded guilty.

[6] In 1997, Dobis became involved in a different and much more serious (at least financially) dishonest scheme. A fellow employee received a letter from "Dr. Ukah Dyke", a person claiming to be "a senior civil servant with the Nigerian National Petroleum Corporation". In the letter, Dr. Dyke claimed that government contracts in Nigeria had been deliberately overestimated and that he was looking for foreign accounts through which to channel proceeds of more than U.S. $35 million. The letter promised a 30 per cent share of these proceeds to the person who assisted with the transfer of the funds into a foreign account. Dobis' fellow employee brought the letter to his attention and Dobis decided to participate, telling the fellow employee that he had a "dummy" account he could use.

[7] The Nigerian letter was a complete scam; indeed, it was probably one of the largest frauds of the 1990s, with many victims in several countries. Once Dobis agreed to participate, the fraudsters managed to persuade him that the money was close to being released, but that first he needed to pay for a particular service to assist in the transfer process. From October 27, 1997 to March 27, 1998, on six different occasions Dobis sent a total of about $1.9 million to banks in Germany and the United States to pay for these services, including "chemical decoding of cash funds", insurance bonds and bail for a fellow participant who had been detained in Germany. All, or virtually all (Dobis claimed that the initial U.S. $25,000 was his own money; however, this expenditure overlapped with the period when he was depositing some of the 21 company cheques into his own accounts) of this money came from Electro Canada coffers.

[8] Dobis received no money from the Nigerian letter scam. By the spring of 1998, Dobis knew that his misappropriations were creating severe consequences for Electro Canada's operating line of credit. A meeting between the company and its banker, CIBC, was scheduled for April 8, 1998. On the morning of that day, Dobis went to Christie and said "we have a problem". He admitted his fraudulent activities during the previous six months. He was fired. The six transactions relating to the Nigerian letter scam formed the basis of the fraud charge to which Dobis pleaded guilty.

[9] The trial judge accepted Dobis' plea of guilty to two charges of fraud and theft over $5,000 on July 6, 2000. For several reasons, including a change in counsel for Dobis and difficulties in obtaining some material, the sentence was not imposed until May 8, 2001.

[10] In his reasons for sentence, the trial judge reviewed the circumstances of the offences. He stated that Dobis was "in a trust position and in control of the company's financial life". He recorded that the "fraud and theft were over a period of over three years" and totalled more than $2 million. He indicated that because of the loss "the operation of the company and the well-being of its employees were put at extreme risk". He described Dobis' motivation for his conduct in this fashion:

The offender used the initial theft to pay for his personal expenses and losses. The larger amount was alleged to have been used to participate in a "Nigerian" fraud, wherein, for the accused's monetary involvement, he was to receive a substantial amount of money from persons in Nigeria, who had possession of stolen government funds.

[11] The trial judge also reviewed Dobis' personal circumstances, including his status as a first offender, his simple lifestyle and limited job prospects, and the strong support of his family.

[12] The trial judge concluded his reasons as follows:

Upon reading the authorities furnished and taking into consideration all the factors to which I have referred, an appropriate sentence in this matter will be two years, less one day, which sentence shall be served in the community.

After imposing this sentence, the trial judge made a final comment:

The only thing saving you from a penitentiary sentence, sir, is your past lack of court involvement. As I said, the effect on the company was absolutely horrific.

[13] The Crown appeals the sentence on two grounds: first, the trial judge erred by overemphasizing the fact that the respondent had no prior criminal record; and, second, the sentence was manifestly unfit. The respondent addresses these issues and raises an additional issue, namely, whether leave to appeal should be refused because part of the transcript of the sentence hearing is missing due to a malfunctioning of the recording equipment.

C. ISSUES

[14] The appeal raises three issues, which I find it convenient to consider in this order:

(1) Should leave to appeal be refused because the appellant has not filed a complete record from the proceedings below?

(2) Did the trial judge err in law by attaching too much weight to the fact that the respondent had no prior criminal record?

(3) Did the trial judge err by imposing a sentence that was manifestly unfit in the circumstances of the case?

D. ANALYSIS

(1) Preliminary Issue -- The Missing Transcript

[15] The trial proceeded by way of guilty pleas to two charges on July 6, 2000. The sentence component of the trial commenced on December 11, 2000 and continued on January 11 and February 28, 2001. The discussion on the first two dates was largely about the material that was being submitted by both parties. On January 11, Crown counsel indicated that he would want to cross-examine Dobis on some of the material he had filed. On February 28, there was a consent adjournment to May 8, 2001.

[16] On May 8, the sentence hearing proceeded. The 28-page transcript begins with this note:

REPORTER'S NOTE: At the outset of the proceedings the recording equipment malfunctioned for the entire tape and all record at this particular point was lost, but did begin recording when the equipment switched to the second tape. Therefore, the evidence given by the accused is not available.

The transcript then records the submissions of both counsel and the trial judge's reasons for sentence. What is missing is the testimony of the respondent, which apparently consisted of cross-examination by Crown counsel on two documents (not affidavits) prepared by Dobis and filed with the court: a six- page document dated April 20, 1998 entitled Memorandum -- chronological events June 1997 to April 1998 M. Dobis, and a three-page document dated December 5, 2000 entitled To: All persons having knowledge in the matter of Mark Dobis and Electro Canada.

[17] The respondent submits that the appeal has not been properly perfected in accordance with Rule 8 of the Ontario Court of Appeal Criminal Appeal Rules, SI/93-169, which provides:

8(11) In respect of an appeal as to sentence only,

(a) where there was a plea of guilty at the opening of the trial before any evidence was taken, the transcript shall include the entire hearing before the court including,

(i) the arraignment,

(ii) the statement of counsel for the prosecution,

(iii) any evidence,

(iv) any submissions of counsel for the prosecution and the defence, and

(v) any statement by the accused prior to the passing of sentence made under section 668 of the Code, and

(vi) the trial judge's reasons for sentence;

(Emphasis added)

[18] The respondent contends that not all of the transcript at the sentence hearing is before this court. He is correct. However, the reason for the omission is an accident -- the recording equipment failed. In my view, Rule 8 must be interpreted to make an allowance for this unusual situation. If an allowance were not made, the strict application of the rule might work great injustice. For example, the logic of the respondent's argument would mean that in this case, if he had been given a sentence he wanted to appeal, he would not have been able to do so, and through no fault of his own.

[19] In my view, the proper approach to the problem of a missing transcript in a criminal trial can be found in R. v. Hayes, 1989 108 (SCC), [1989] 1 S.C.R. 44, 48 C.C.C. (3d) 161. In that case, a murder appeal, a malfunctioning of the recording equipment at the trial meant that part of the trial judge's charge to the jury was not available for the appeal. Section 609(2) of the Criminal Code, R.S.C. 1970, c. C-34 (now, as amended, R.S.C. 1985, c. C-46, s. 682(2)) was quite similar to Rule 8 of the Criminal Appeal Rules:

609(2) A copy or transcript of

(a) the evidence taken at the trial,

(b) the charge to the jury, if any,

(c) the reasons for judgment, if any, and

(d) the addresses of the prosecutor and the accused or counsel for the accused by way of summing up . . .,

shall be furnished to the court of appeal, except in so far as it is dispensed with by order of a judge of that court.

[20] L'Heureux-Dubé J. interpreted this provision in this fashion, at p. 48 S.C.R., p. 165 C.C.C.:

A new trial need not be ordered for every gap in a transcript. As a general rule, there must be a serious possibility that there was an error in the missing portion of the transcript, or that the omission deprived the appellant of a ground of appeal.

[21] By parity of reasoning, a new sentence hearing need not be ordered for every gap in a transcript, especially where, as in Hayes and in this appeal, the gap is accidental. Nor should an appeal court refuse outright to hear an appeal solely because of a missing transcript. The question should be: is the respondent prejudiced on this appeal because of the missing transcript?

[22] I think the respondent is not prejudiced. In my view, for several reasons, there is no "serious possibility" that the missing transcript is necessary for a just resolution of the appeal. First, the respondent filed two comprehensive documents dealing with the chronology and details of his crimes and with his personal situation and feelings, including his "deep regret for the result of my actions". For purposes of the appeal, the respondent's statements in these documents, unchallenged by the missing cross-examination, will serve as his description and explanation. Second, the trial judge said nothing in his reasons for sentence about anything the respondent said in his testimony at the hearing. Third, the respondent knows what he said in his testimony. If he truly had a concern about the relevance of the testimony to this appeal, he could have sought to place it before this court by way of an affidavit (by himself or trial counsel) tendered as fresh evidence. Since the transcript is missing only by rea son of accident, it is highly unlikely that the Crown would have objected to, or this court refused, admission of the fresh evidence.

[23] In summary, there is no basis on which to refuse leave to appeal because of the missing transcript. What is missing prejudices neither party.

[24] Accordingly, I proceed to a consideration of the appeal on its merits. I do so with the knowledge that the Supreme Court of Canada has strongly cautioned appellate courts to show substantial deference to the sentences imposed by trial judges, including conditional sentences: see R. v. Shropshire, 1995 47 (SCC), [1995] 4 S.C.R. 227, 102 C.C.C. (3d) 193, and R. v. Proulx, 2000 SCC 5, [2000] 1 S.C.R. 61, 140 C.C.C. (3d) 449. However, interference with a sentence is warranted if the trial judge has committed an error in principle, failed to consider or overemphasized a relevant factor, or if the sentence is demonstrably unfit: see R. v. M. (C.A.), 1996 230 (SCC), [1996] 1 S.C.R. 500, 105 C.C.C. (3d) 327. The Crown contends that the trial judge overemphasized a single factor in his reasons for sentence. The Crown also submits that the sentence imposed on the respondent was demonstrably unfit.

(2) Error in Principle -- Overemphasis on "No Prior Criminal Record" Factor

[25] The Crown submits that the trial judge committed an error in principle by overemphasizing the fact that Dobis had no prior record before being convicted of fraud and theft in this case. The Crown contends that this factor should be given little weight in a fraud case because it is the offender's good reputation in the community, including the absence of a criminal record, that enables the offender to get into a position to commit the fraud: see R. v. Foran, 1969 209 (ON CA), [1970] 2 O.R. 52 at p. 53, [1970] 1 C.C.C. 336 at p. 337 (C.A.) and R. v. Bunn, 2000 SCC 9, [2000] 1 S.C.R. 183 at p. 204, 140 C.C.C. (3d) 505 at p. 522, per Bastarache J. (dissenting). Finally, the Crown contends that the trial judge's overemphasis of the factor of no prior criminal record is manifest in the trial judge's reasons, especially his concluding remark to the accused after he had imposed a conditional sentence:

The only thing saving you from a penitentiary sentence, sir, is your past lack of court involvement.

[26] I disagree with the Crown's submissions on this point. In my view, the trial judge's final remark was in the nature of a parting comment to the accused as the proceedings ended. It is the type of comment that a judge will often make to an accused at the conclusion of a sentence.

[27] Moreover, a fair reading of the trial judge's reasons for sentence indicates that he carefully considered the full range of factors that a judge should consider before imposing a sentence. He discussed the circumstances of the offences and of the offender and considered the relevant provisions of the Criminal Code and case authorities. He said:

Upon reading the authorities furnished and taking into consideration all the factors to which I have referred, an appropriate sentence in this matter will be two years, less one day, which sentence shall be served in the community.

(Emphasis added)

[28] In summary, an offender's prior criminal record, or the absence thereof, is always a factor entitled to some weight in a sentencing context. In my view, the trial judge neither ignored nor attached too much weight to this factor when he imposed sentence on the respondent.

(3) "Manifestly Unfit" Sentence

[29] The Crown contends that the sentence imposed on the respondent was manifestly unfit in two respects -- its length and its form. The Crown submits that the trial judge erred by not sentencing the respondent to a penitentiary term. In the alternative, the Crown submits that if a reformatory sentence was appropriate, the trial judge erred by permitting the respondent to serve the sentence in the community.

[30] The issues of length and form of sentence overlap to a certain extent under the conditional sentence provisions of the Criminal Code. As explained by Lamer C.J.C. in Proulx, supra, under the heading [A Purposive Interpretation of Section 742.1(a)], at pp. 97-98 S.C.R., p. 479 C.C.C.:

[A] purposive interpretation of s. 742.1(a) does not dictate a rigid two-step approach in which the judge would first have to impose a term of imprisonment of a fixed duration and then decide if that fixed term of imprisonment can be served in the community. In my view, the requirement that the court must impose a sentence of imprisonment of less than two years can be fulfilled by a preliminary determination of the appropriate range of available sentences. Thus, the approach I suggest still requires the judge to proceed in two stages. However, the judge need not impose a term of imprisonment of a fixed duration at the first stage of the analysis. Rather, at this stage, the judge simply has to exclude two possibilities: (a) probationary measures; and (b) a penitentiary term. If either of these sentences is appropriate, then a conditional sentence should not be imposed.

(Emphasis is Lamer C.J.C.'s.)

[31] Applying this analysis, the first question to be addressed is whether the trial judge erred by not imposing a penitentiary sentence on the respondent.

(a) Reformatory v. penitentiary

[32] The circumstances surrounding the offences committed by the respondent establish that his conduct and its consequences were particularly serious.

[33] Dobis was an employee in a position of trust with Electro Canada. He commenced stealing from the company less than a year after being made accounting manager. His thefts and fraud continued for more than three years. His dishonest conduct consisted of two different components -- direct thefts for deposit into his personal accounts and thefts to participate in a "get rich" scheme with an eye to reaping more than U.S. $10 million. The amount stolen under both schemes was very large -- about $286,000 and $1.9 million respectively. There was a good deal of planning, skill and deception required to execute such a massive theft and fraud over such a long period of time.

[34] The victims of the crimes suffered terribly. The company was crippled; its survival, including the jobs of 250 people, is still in jeopardy. Moreover, the long-term goals of the family owners of the company have been rendered fragile. As expressed by Craig Christie in his Victim Impact Statement:

. . . I bought Electro Canada Limited, a small electrical products manufacturing company with 20 employees, in 1979.

For the next twenty years, my wife and I diligently worked long hours, lived modestly and managed the Company conservatively, virtually debt free, reinvesting all of the profits in the Company, in order to grow Electro Canada, which was to provide our retirement pension and an inheritance for our six children.

All of this was put in doubt, and remains in doubt today, because of the respondent's crimes.

[35] Moreover, at least from Dobis' perspective, there was a second intended victim of the Nigerian letter scam -- the Government and people of Nigeria. If the scheme had been a real one, U.S. $35 million would have been removed from Nigeria and its people and Dobis would have pocketed more than U.S. $10 million. Put bluntly, in Dobis' eyes the scheme coupled greed (his) and misery (Nigeria's) on a massive scale, even though the intended international component of the fraud never came to fruition.

[36] In my view, this description of the circumstances surrounding the respondent's offences required the imposition of a penitentiary sentence, as the Crown had contended when it sought a sentence in the three- to five-year range. Most of the factors I have described have been held by this court to require a penitentiary sentence: see, for example, R. v. Scherer (1984), 1984 3594 (ON CA), 16 C.C.C. (3d) 30, 5 O.A.C. 297 (C.A.) (seven years); R. v. Holden, [2000] O.J. No. 3481 (six years); R. v. Villanueva, [1999] O.J. No. 4939 (six years); R. v. Montemurro (unreported, June 21, 1984) (six years); R. v. Bertram (1990), 40 O.A.C. 317 (C.A.) (six years); R. v. Nichols (2001), 2001 5680 (ON CA), 46 C.R. (5th) 294 (four years); R. v. Gray (1995), 1995 18 (ON CA), 76 O.A.C. 387 (C.A.) (two-and-one-half years and two years less a day for two accused); and R. v. Ruhland (1998), 1998 6138 (ON CA), 123 C.C.C. (3d) 262 (Ont. C.A.) (three years and two years less a day for two accused).

[37] There are fraud cases in which a reformatory sentence has been upheld or imposed by this court. However, in my view, each of those cases had important mitigating or differentiating factors which are not present in this case.

[38] In R. v. McEachern (1978), 1978 2506 (ON CA), 42 C.C.C. (2d) 189, 7 C.R. (3d) S-8 (Ont. C.A.), a bank manager stole $87,000 (not millions). He was married and had two children. He received a suspended sentence at trial. When the appeal hearing took place, the family was expecting a third child. Nevertheless, the court allowed the appeal and increased the sentence to 18 months in custody.

[39] In R. v. Pierce (1997), 1997 3020 (ON CA), 32 O.R. (3d) 321, 114 C.C.C. (3d) 23 (C.A.), a woman defrauded her employer of $270,000. She received a sentence of 21 months. On appeal, the sentence was reduced to 12 months, with the court taking note of her personal circumstances (she was the mother of three small children).

[40] In R. v. Underys, [1999] O.J. No. 4372, this court upheld a conditional sentence of 18 months for a manager who stole more than $1 million from a credit union. However, the issue on the appeal in that case was the appropriateness of a conditional sentence; the court's endorsement began: "The Crown at trial did not take issue with the sentence of eighteen months" (para. 1).

[41] I am not unsympathetic to the personal circumstances of the respondent. These were his first criminal offences. He is university educated and is living a simple lifestyle. His job prospects are probably limited. There is no suggestion that he has hidden any of the money he obtained by defrauding and stealing from Electro Canada. Although he does not have children to support, he does have a partner and the strong support of his parents and brother. His mother, in particular, depends on him.

[42] However, in the end I am persuaded that the serious nature and consequences of the offences committed by the respondent required the imposition of a penitentiary sentence. There is a real need to emphasize denunciation and, especially, general deterrence in the realm of large-scale frauds committed by persons in positions of trust with devastating consequences for their victims, which is how I would characterize the offences in this case.

[43] In McEachern, supra, Howland C.J.O. stated that "the most important principle in sentencing a person who holds a position of trust is that of general deterrence" (p. 191 C.C.C.).

[44] In Bertram, supra, Brooke J.A. said, at p. 319 O.A.C.:

The sentences in such cases are not really concerned with rehabilitation. Instead, they are concerned with general deterrence and with warning such persons that substantial penitentiary sentences will follow this type of crime, to say nothing of the serious disgrace to them and everyone connected with them and their probable financial ruin.

[45] Similarly, in Gray, supra, Carthy J.A. stated, at pp. 398-99 O.A.C.:

[T]here are few crimes where the aspect of deterrence is more significant. It is not a crime of impulse and is of a type that is normally committed by a person who is knowledgeable and should be aware of the consequences. That awareness comes from the sentences given to others.

[46] Finally, and quite recently, in Holden, supra, Doherty J.A. identified "general deterrence as the paramount consideration" (para. 2) in large-scale fraud cases.

[47] I agree with all of these statements. Accordingly, general deterrence needed to be central to the trial judge's sentence in this case. In my view, the nature and consequences of the theft and fraud committed by the respondent, which were fully and well described by the trial judge in his reasons, required a penitentiary sentence, probably in the range suggested by the Crown at trial, namely, three to five years.

(b) Custody v. community

[48] Strictly speaking, in light of the conclusion I reached in the preceding section, it is not necessary to address this issue. However, I will do so for the sake of completeness.

[49] It is clear that no category of offence is excluded from the conditional sentence regime: see Proulx, supra, at pp. 126-27 S.C.R., p. 501 C.C.C. Specifically, a conditional sentence is a possible sentence in a fraud case, even with respect to a large-scale fraud: see Bunn, supra.

[50] However, it is also clear that certain offences will usually lead to custodial sentences. As expressed by Lamer C.J.C. in Proulx, at p. 117 S.C.R., p. 494 C.C.C.:

[T]here may be circumstances in which the need for deterrence will warrant incarceration. This will depend in part on whether the offence is one in which the effects of incarceration are likely to have a real deterrent effect . . .

[51] This court has said repeatedly that general deterrence is central to the sentencing process in cases involving large- scale frauds with serious consequences for the victims: see McEachern, Bertram, Gray and Holden, supra. Importantly, the court has said the same thing since the introduction of the conditional sentencing regime. Conditional sentences have been rejected in large-scale fraud cases such as Pierce, supra, and Ruhland, supra, and commented on adversely in the leading Ontario case dealing with conditional sentences, R. v. Wismayer (1997), 1997 3294 (ON CA), 33 O.R. (3d) 225, 115 C.C.C. (3d) 18 (C.A.).

[52] In Pierce, Finlayson J.A. observed, at p. 337 O.R., p. 40 C.C.C.:

I would . . . refuse the application to permit the appellant to serve the sentence in the community. The abuse of a position of trust or authority in relation to a victim is an express aggravating circumstance set out in the sentencing guidelines under s. 718.2. This factor has traditionally drawn a severe custodial term even with first offenders.

(Emphasis added)

[53] In Wismayer, Rosenberg J.A. said, at p. 243 O.R., p. 38 C.C.C.:

General deterrence, as the principal objective animating the refusal to impose a conditional sentence, should be reserved for those offences that are likely to be affected by a general deterrent effect. Large-scale, well-planned fraud by persons in positions of trust, such as the accused in R. v. Pierce, would seem to be one of those offences.

(Emphasis added)

[54] The respondent abused a position of trust in relation to a victim, his employer. He committed a large-scale well-planned fraud. Moreover, there are none of the extreme personal mitigating circumstances that were central to the decisions to impose conditional sentences in two large-scale fraud cases, Underys, supra ("the many mitigating circumstances of the offender": para. 4), and Bunn, supra ("The respondent was the sole provider and caregiver for both his wife, who suffered from multiple sclerosis and had been confined to a wheelchair for years, and their teenage daughter": p. 198 S.C.R., p. 517 C.C.C.). Accordingly, the imposition of a conditional sentence in the circumstances of this case was also manifestly unfit.

E. DISPOSITION

[55] I would grant leave to appeal the sentence and allow the appeal from sentence. An appropriate sentence at the trial would have been, at a minimum, at the lowest point in the range suggested by the Crown, namely, three years.

[56] However, the respondent has served 9 1/2 months of his conditional sentence. I would give him full credit for this in light of the fact that the conditions imposed by the trial judge for the first 12 months of the conditional sentence almost amounted to house arrest.

[57] In the circumstances of this case, I would make a modest adjustment in the sentence to be imposed so that the respondent can serve the remainder of the sentence in a reformatory setting. I would impose a custodial sentence of two years less a day, to commence on the day the respondent surrenders into custody.

Appeal allowed.