R. v. Popert, 2010 ONCA 89

CITATION: R. v. Popert, 2010 ONCA 89

DATE: 20100202

DOCKET: C46852

COURT OF APPEAL FOR ONTARIO

Laskin, Sharpe and Gillese JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

Neil Popert

Appellant

Michael Dineen, for the appellant

Benita Wassenaar, for the respondent

Heard: December 2, 2009

On appeal from the sentence imposed by Justice George J. Brophy of the Ontario Court of Justice on November 22, 2006.

Gillese J.A.:

[1] Mr. Popert and a friend set fire to a house. He pleaded guilty to arson and failure to comply with an undertaking, for which he was sentenced to nine months’ imprisonment (15 days concurrent on the fail to comply conviction) and twelve months’ probation. In addition, Mr. Popert was ordered to make restitution of $40,537.50 to the insurance company that had paid out monies due to the fire (the “restitution order”). In this appeal against sentence, he asks that the restitution order be set aside.

[2] For the reasons that follow, I would allow the appeal.

BACKGROUND

[3] Tim and Gloria Doucet lived in a house in the village of Elmwood, Ontario. Gretha Holmes is Tim Doucet’s mother. She owned the property in which the Doucets lived.

[4] At the time of the offence, Mr. Popert was 20 years old and unemployed. He lived with Tim and Gloria Doucet, whom he knew through his stepfather. Mr. Popert had known the Doucets for many years and saw them as parental figures. Mr. Popert’s friend, Derek Wrightson, also lived with the Doucets. The two young men were fed and housed by the Doucets in exchange for doing chores around the house.

[5] The Doucets were experiencing financial difficulties related to problems with the septic system in the house in which they lived. Gloria Doucet, in the presence of her husband Tim Doucet, asked Messrs. Popert and Wrightson to burn down their house so that they could collect the insurance money. They offered to pay for the arson but no dollar figure was discussed.

[6] On February 28, 2005, the Doucets left their home in Elmwood and went to Owen Sound. Using a propane torch from the house, Messrs. Popert and Wrightson set fire to some furniture in the basement of the house.

[7] After the house was on fire, Mr. Wrightson called 9-1-1. Firefighters arrived and put out the fire. Although the house was not burnt to the ground, it suffered considerable damage.

[8] The Doucets pursued an insurance claim for contents damage, the cost of cleaning and repairing the house and belongings that had been damaged by the fire, and additional living expenses incurred because of the fire. Gretha Holmes was the named insurance policy holder for the property. As the named insured, payments were made to Ms. Holmes or to the companies that performed the cleaning services, but all of the insurance company’s dealings were with the Doucets. Apparently most, if not all, of the $81,074[^1] that the insurance company paid out in claims was made for the benefit of the Doucets.

[9] Mr. Popert received no money for his part in the arson.

[10] Soon after the fire, Mr. Wrightson turned himself in to the police and confessed to his role in the arson. Shortly thereafter, Mr. Popert did the same thing. He agreed to help the police by surreptitiously recording conversations with the Doucets. He obtained some evidence for the Crown.

[11] Mr. Popert was charged with arson, as were Mr. Wrightson and the Doucets. Both Mr. Popert and Mr. Wrightson pleaded guilty to an offence under s. 434 of the Criminal Code. They then testified as Crown witnesses against the Doucets. I understand from counsel that the Doucets were convicted of arson but that no restitution orders were made against them.

[12] Messrs. Popert and Wrightson were sentenced to nine months in prison and 12 months of probation. As well, “stand-alone” restitution orders for $40,537.50 in favour of the insurance company were imposed on both.

[13] The sentencing judge gave thorough reasons for imposing a jail term followed by probation. In so doing, he considered Mr. Popert’s personal circumstances, which can be summarized as follows. Mr. Popert was 20 years old at the time of the offence. He had no prior criminal record. At the age of 15, he left his mother’s house after suffering verbal and physical abuse at the hands of his mother and stepfather. From that point forward, he had no permanent residence. He slept on the couches of relatives, friends and acquaintances in exchange for “helping out”. He left school after grade 11. At the time of the offence, he had a limited employment history, having been quickly fired from the only jobs he had found. He has a serious history of drug use; long-term regular marijuana use has negatively impacted on his ability to function in society. At the time of sentencing, he had begun to receive social assistance.

[14] Very brief reasons were given for imposing the restitution order. They read as follows:

In addition, they will comply with an order for restitution. The clerk has handed me a note that the total loss to the insurance company is $81,074. It seems to me that this is obviously a big sum and will [be] a major problem for each of them. Neither one of them will be able to pay this as part of a probationary disposition. So the restitution order will be a freestanding restitution order, which simply means it will act as a civil judgment against you.

I do not know what the outcome is going to be with respect to the other participants in this matter, but it seems to me, with respect to these two individuals, that the only proper way, at this stage of the proceedings, to deal with it is for it to be on the basis that they each share one half the responsibility for the loss. That means each of them will be responsible for $40,537.50. The Clerk will do the actual math and it may be a few pennies different than what I have just said. That simply is a freestanding restitution order, and they will each be responsible for it.

[15] On appeal, Mr. Popert argues that the sentencing judge erred in making the restitution order because: 1) he did not receive any of the funds paid out by the insurance company or otherwise profit from the offence; and 2) it is unlikely that he will ever be in a position to pay such an amount.

THE ISSUES

[16] At the oral hearing of the appeal, the court asked for written submissions on whether the court had the power to make a restitution order in favour of an insurance company under s. 738(1)(a) of the Criminal Code. Those submissions have now been received.

[17] Accordingly, there are two issues to be resolved on this appeal:

1. Can an insurance company be the subject of a restitution order under s. 738(1)(a) of the Criminal Code?
2. Did the sentencing judge err in making the restitution order against Mr. Popert?

CAN AN INSURANCE COMPANY BE THE SUBJECT OF A RESTITUTION ORDER UNDER S. 738(1)(a) OF THE CRIMINAL CODE?

[18] The power to make a restitution order comes from s. 738(1) of the Criminal Code. The relevant part of s. 738(1) reads as follows:

(1)Where an offender is convicted or discharged under section 730 of an offence, the court imposing sentence on or discharging the offender may, on application of the Attorney General or on its own motion, in addition to any other measure imposed on the offender, order that the offender make restitution to another person as follows:

(a) in the case of damage to, or the loss or destruction of, the property of any person as a result of the commission of the offence or the arrest or attempted arrest of the offender, by paying to the person an amount not exceeding the replacement value of the property as of the date the order is imposed, less the value of any part of the property that is returned to that person as of the date it is returned, where the amount is readily ascertainable. [Emphasis added.]

[19] Section 653(1) of the Criminal Code, R.S.C. 1970, c. C-34, and s. 725(1) of the Criminal Code, R.S.C. 1985, c. C-46, as amended by R.S.C. 1985, c. 27 (1st supp.), s. 158, predecessors to s. 738(1), are relevant to the following discussion so are set out now.

[20] Section 653(1) provided:

A court that convicts an accused of an indictable offence may, upon the application of a person aggrieved, at the time sentence is imposed, order the accused to pay to that person an amount by way of satisfaction or compensation for loss of or damage to property suffered by the applicant as a result of the commission of the offence of which the accused is convicted.

[21] Section 653(1) was replaced by s. 725(1), which in turn was replaced by s. 738(1). Section 725(1) provided:

A court that convicts or discharges under section 736 an accused of an offence may, on the application of a person aggrieved, at the time sentence is imposed, order the accused to pay to that person an amount by way of satisfaction or compensation for loss of or damage to property suffered by that person as a result of the commission of the offence.

[22] Both the appellant and the Crown acknowledge that the courts have made restitution orders in favour of insurance companies based on s. 738(1)(a) of the Code.[^2] Both also submit that the court has the power to make such orders. However, they offer different views as to the nature and scope of that power.

[23] The appellant submits that an insurance company is not a person with property that has been lost or damaged as a result of an offence. However, based on the Supreme Court of Canada’s decision in R. v. Fitzgibbon, [1990] 1 S.C.R. 1005 and Ontario legislation regulating the insurance industry, the appellant says that an insurance company may acquire an entitlement to a restitution order under s. 738(1)(a) through subrogation.

[24] In Fitzgibbon, it was argued that the Law Society of Upper Canada was not an “person aggrieved” and, therefore, was not entitled to a restitution order under s. 653(1) of the Criminal Code, despite the fact that the Law Society had made compensation to the victims of the offences. The Supreme Court of Canada rejected this argument. At pp. 1018-19, Cory J. writing for the court, said:

At the outset, it should be observed that one of the goals and aims of s. 653 was to provide a convenient, rapid and inexpensive means of recovery for the victim. Why should a victim of crime in a situation where the amount involved is readily ascertained and acknowledged by the accused be forced to undertake the often slow, tedious and expensive civil proceedings against the very person who has stolen from or defrauded the victim? The Law Society has attempted to simplify the task for the defrauded client and to provide a sure and speedy means of repayment. Upon proof of the victim’s claim, the Law Society makes payment on behalf of the dishonest solicitor. The policy of the Law Society flows from sound and responsible provisions found in the Law Society Act. By these provisions all lawyers recognize and accept responsibility for the acts of their dishonest colleagues. The Law Society should not be penalized for compensating the defrauded clients. Based on common law principles and for sound policy reasons, the Law Society should be subrogated to the rights of the defrauded clients which it has compensated.

As well, the Law Society Act itself provides that the Law Society is to be subrogated to the rights of the victim …

For these reasons, the Law Society is properly entitled to be subrogated to the rights of the victim and was entitled to be named as the beneficiary of the compensation order.

[25] Section 152(1) of the Insurance Act, R.S.O. 1990, c. I.8, is an equivalent subrogation section for fire insurance claims. It provides that:

152(1) The insurer, upon making a payment or assuming liability therefor under a contract to which this Part applies, is subrogated to all rights of recovery of the insured against any person, and may bring action in the name of the insured to enforce such rights.

[26] Based on the reasoning in Fitzgibbon and s. 152(1) of the Insurance Act, the appellant submits that the court has the power to make a restitution order in favour of an insurance company that has indemnified a person whose property was damaged, lost or destroyed as a result of the commission of an offence. However, as that power is based on subrogation, it is limited in two ways. First, a restitution order can be made only if the recipient of the insurance money would him or herself have a valid claim for restitution. Second, the restitution order is limited to the cost of repairing or replacing the lost property.

[27] In the present case, the appellant says that the first condition is not met. The insurance claims were submitted by, and paid primarily for the benefit of, Tim and Gloria Doucet. But it was Tim and Gloria Doucet who asked the appellant to burn down their home. As the Doucets were ultimately responsible for the arson, they would have no right to claim restitution from the appellant for the damages they suffered as a result of the fire. Accordingly, there was no valid claim that could pass from the Doucets to the insurance company by way of subrogation and no restitution order could be made in its favour. Instead, the appellant contends, the insurance company’s recourse lies solely against the Doucets, who caused its loss by filing fraudulent claims.

[28] The Crown shares the appellant’s view, based on Fitzgibbon, that a restitution order can be made in favour of an insurance company through subrogation of a victim’s rights. It notes that the Manitoba Court of Appeal relied on Fitzgibbon in ruling that a restitution order could be made in favour of the Manitoba Public Insurance Corporation: see R. v. Scott (2003), 2003 MBCA 147, 180 Man. R. (2d) 198.

[29] However, it submits that there is a second basis on which the court has jurisdiction to make such orders. It contends that s. 738(1)(a) can be read as empowering the court to make such orders if the insurance company is seen as a victim of the offence. The insurance company is a “person”. “Property” is defined broadly in s. 2[^3] of the Criminal Code and clearly includes money. Thus, the money paid out as a result of the insurance claims arising from the arson can be seen to be the “loss” of “property” of a “person” that occurred “as a result of the commission of the offence”.

[30] In making this submission, the Crown refers to R. v. Ticknovich (2003), 2004 ABQB 421, 356 A.R. 57 (Q.B.). In that case, Ms. Ticknovich was convicted of numerous counts of fraud. The Crown sought a restitution order under s. 738(1)(a) in favour of the Alberta Treasury Branch. Ms. Ticknovich argued that the Treasury Branch was not a victim because it had not been mentioned in the indictment. Justice Watson rejected that submission and imposed a restitution order for $110,000, the amount paid out by the Treasury Branch as a result of the fraud, plus interest.

[31] On the interpretation urged by the Crown, the relevant parts of s. 738(1) would read as follows:

(1) … the court … may… order that the offender make restitution to another person as follows:

(a) in the case of … the loss … of… property of any person as a result of the commission of the offence …

[32] I accept the Crown’s submission on the interpretation to be given to s. 738(1)(a). Accordingly, in my view, the court’s jurisdiction to make the restitution order rests on the words of s. 738(1)(a) itself, as well as on subrogation. Thus, assuming that the appellant is correct and the court did not have the power to make the restitution order if its jurisdiction is based on subrogation, in my view the court nonetheless had that power based on the wording of s. 738(1)(a). I reach this conclusion on the interpretation to be afforded s. 738(1)(a) for two reasons.

[33] First, on a plain reading of s. 738(1)(a), its scope is not restricted to persons whose property has been directly damaged, lost or destroyed as a result of an offence. Section 738(1) empowers the court to order restitution to “another person” in the case of damage, loss or destruction of the property of “any person”. This is to be contrasted with the predecessor provisions (ss. 653(1) and 725(1)), which limited the court to making compensation orders in favour of the person whose property had been lost or damaged.

[34] Moreover, I see no reason in principle to interpret the scope of s. 738 narrowly so as to limit it to persons whose property has been directly damaged, lost or destroyed as a result of an offence. As the Crown notes, unduly limiting s. 738(1)(a) could denude the section of its force, given the pervasive presence of insurance in modern society.

[35] Second, this interpretation accords with a purposive reading of s. 738(1). The purpose of s. 738(1) is to provide a “convenient, rapid and inexpensive means of recovery”[^4] for victims. The insurance company is, in a very real sense, a victim of the arson. Just as the Supreme Court recognized in Fitzgibbon that the Law Society should not be penalised for having compensated defrauded clients, so too insurance companies should not be penalized for having compensated insured persons.

[36] When the insurance company is seen as a victim of the offence, the amount it paid out because of the arson is the “loss” of “property”. However, that does not necessarily mean that a restitution order can be made under s. 738(1) for any and all monies that the insurance company paid out as a result of the offence. Questions arise about the quantification of such orders. For example, can a restitution order in favour of an insurance company be for an amount greater than the “replacement value of the property”? Can interest be included in such orders?[^5] Are payments that have been made for living expenses, such as in this case, properly considered for the purposes of restitution orders or are the orders limited to the costs of repairing and replacing goods that have been damaged or destroyed? As I explain below, in my view the restitution order should be set aside. Accordingly, I leave any questions of quantification that might arise to be decided in cases in which they have been squarely raised and argued.

[37] In light of these questions, one might be concerned that a purposive interpretation of s. 738(1) will lead to the imposition of restitution orders for losses that are not sufficiently proximate to the offence. That concern is met in two ways. First, an application for a restitution order under s. 738(1) may be brought only by the Attorney General or on the court’s own motion. The situation under both ss. 653(1) and 725(1) was quite different as those provisions entitled any “person aggrieved” to make an application for a compensation order. Second, restitution orders are discretionary. The discretionary nature of the power coupled with the principles that govern their making (discussed in the following section) are adequate to ensure that restitution orders are fair and appropriate. If a court is concerned that some or all of a “loss” is not sufficiently causally connected to the offence, it may refuse to make the order or adjust its quantum.

[38] I would conclude on this issue by observing that a very real benefit flows from a purposive interpretation of s. 738(1)(a). Restitution orders are not a substitute for civil proceedings nor are they intended to displace the civil remedies necessary to ensure full compensation to victims: see R. v. Zelensky (1978), 41 C.C.C. (2d) 97. Rather, restitution orders are one factor to be considered when deciding the total sentence to be imposed on an offender. Their role was described in Fitzgibbon[^6] in the following way:

In appropriate cases, compensation orders provide an extremely useful and effective tool in the sentencing procedure. The order can provide flexibility and sensitivity to the ever difficult task of sentencing. It can be an effective means of rehabilitating the accused because this order quickly makes him directly responsible for making restitution to the victim. … The order also benefits the victim by providing a speedy and inexpensive manner of recovering the debt. … Society as a whole benefits from the order since its imposition may reduce the term of imprisonment and provides for the reintegration of the convicted person as a useful and responsible member of the community at the earliest possible date. The practical efficacy and immediacy of the order will help to preserve the confidence of the community in the legal system.

[39] Like any other aspect of sentencing, the focus must remain on the offence and the offender – it ought not to be shifted to complicated accounting issues. Restitution orders made on the basis of subrogation run a greater risk of that shift in focus.

DID THE SENTENCING JUDGE ERR IN IMPOSING THE RESTITUTION ORDER?

[40] Restitution orders are discretionary and, as such, are entitled to deference.[^7] They are to be made with restraint and caution.[^8] As this court has repeatedly stated, the ability of an offender to make restitution is an important factor that must be considered before a restitution order is imposed: see, for example, R. v. Biegus (1999), 141 C.C.C. (3d) 245 at para. 15. As Feldman J.A. explains in para. 15 of Biegus:

A restitution order made by a sentencing court survives any bankruptcy of the accused: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 178(1)(a). Therefore, it is there for life. It is not intended to be such a burden that it may affect the prospects for rehabilitation of the accused. That is why ability to pay is one of the factors which the court must consider.

[41] In this case, the sentencing judge erred in failing to consider the appellant’s ability to pay. While the reasons suggest that the sentencing judge was alert to the appellant’s inability to pay, there was no attempt to address why that fact was irrelevant in imposing the order. The court was faced with a 22-year-old young man with no employment history, no assets and no employable skills, who was surviving on social assistance and the charity of others. In the circumstances, the appellant did not have the means to pay a restitution order in excess of $40,000 and it seems unlikely that he ever will be in such a position. It also appears likely that an order of this magnitude would place such a burden on the appellant that it will likely impair his chances of rehabilitation.

[42] Furthermore, when more than one person is involved in the commission of an offence, other considerations must be taken into account in order to ensure that imposition of a restitution order on a given offender does not “work an unfairness as between the perpetrators”.[^9] In the present case, those considerations include that the insurance company’s loss is primarily attributable to the Doucets, who initiated the arson scheme, pursued the insurance claim and received the benefit of the insurance money; apparently no restitution order was made against the Doucets; and, the appellant received no money for his role in the offence.

[43] A restitution order is one factor in the total punishment imposed on an offender. When all of the relevant factors are considered, it seems to me that the appellant – a youthful first offender – has been adequately punished for his role in the offence by the sentence he received. Imposition of the restitution order would work an unfairness.

[44] For all of these reasons, I would set aside the restitution order rather than, as the Crown urged, reduce its size.

DISPOSITION

[45] Accordingly, I would grant leave to appeal sentence, allow the appeal and set aside the restitution order.

RELEASED: February 2, 2010 (“J.I.L.”)

“E.E. Gillese J.A.”

“I agree J.I. Laskin J.A.”

“I agree Robert J. Sharpe J.A.”

[^1]: This figure is taken from the reasons for sentence. The insurance company representative testified to a slightly different total amount. The total of the individual amounts that he testified were paid out was slightly different again. In each case, however, the loss was around $81,000. [^2]: See, for example, R. v. Hirnschall (2003), 176 C.C.C. (3d) 311 (Ont. C.A.) and R. v. Mohamad (2004), 69 O.R. (3d) 481 (C.A.), in which this court was prepared to make a restitution order in favour of an insurance company but for problems with the sufficiency of proof. [^3]: Section 2 provides that “property” includes “real and personal property of every description” .[Emphasis added.] [^4]: Fitzgibbon at p. 1018 in respect of s. 653(1), a predecessor to s. 738(1). [^5]: I would note, however, that the comments of this court in R. v. Devgan (1999), 44 O.R. (3d) 161, at paras. 42-44, leave to appeal to S.C.C. refused, 134 O.A.C. 396, are not controlling as they are made with respect to s. 725(1), the wording of which differs from that of s. 738(1). [^6]: At pp. 1012-13. [^7]: Devgan at para. 28. [^8]: Mohamad at para. 72. [^9]: Biegus at para. 27.