COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Mahmood, 2016 ONCA 75

DATE: 20160126

DOCKET: C57421 and C59069

MacPherson, MacFarland and Roberts JJ.A.

BETWEEN

C57421

Her Majesty the Queen

Appellant

and

Najam Mahmood

Respondent

AND BETWEEN

C59069

Her Majesty the Queen

Respondent

and

Najam Mahmood

Appellant

Najam Mahmood, acting in person

Erin Carley, for Her Majesty the Queen

Heard: December 1, 2015

On appeal from the conviction entered by Justice Gordon D. Lemon of the Superior Court of Justice on December 21, 2012, sitting with a jury, and the sentence imposed on July 5, 2013.

MacPherson J.A.:

A. Introduction

[1] On December 21, 2012, following a jury trial, Najam Mahmood was convicted of eight counts of tax evasion under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”) and the Excise Tax Act, R.S.C. 1985, c. E-15 (“ETA”). More specifically, he was convicted of tax evasion pursuant to s. 239(1)(d) of the ITA in respect of the 2003, 2004, 2005 and 2006 taxation years and failing to remit GST collected during each of these taxation years pursuant to s. 327(1)(c) of the ETA.

[2] On July 5, 2013, Mr. Mahmood was sentenced to one year in jail (less time served of one month) and eight fines totalling $687,000, with ten years to pay.

[3] Mr. Mahmood appeals the convictions. The Crown appeals the sentence.

B. Facts

[4] Between 2003 and 2006, Mr. Mahmood operated a business teaching foreign exchange trading. He earned approximately $3,000,000 in the form of tuition fees and commissions. He did not file tax returns in respect of these years and thereby evaded the payment of $358,588 in income taxes. He also failed to pay $116,412 in GST. The total tax evaded during the four-year period was $475,000.

C. Mr. Mahmood’s conviction appeal

[5] At the conclusion of Mr. Mahmood’s oral submissions on his conviction appeal, the court indicated that the appeal would be dismissed, with reasons to follow. These are those reasons.

[6] Mr. Mahmood’s principal submission is that the trial judge confused the jury by making no distinction between tax evasion (illegal) and tax avoidance (legal) in the course of his charge to the jury.

[7] I do not accept this submission. In his jury charge, the trial judge set out the essential elements of the offence of tax evasion that the Crown must prove:

For you to find Mr. Mahmood guilty of any of these counts, Crown counsel must prove each of these essential elements beyond a reasonable doubt:

i. that Mr. Mahmood knew that tax was owed under the Act as charged;

ii. that Mr. Mahmood did something or engaged in a course of conduct that avoided or attempted to avoid the payment of tax;

iii. that Mr. Mahmood intended to avoid or intended to attempt to avoid payment of that tax.

[8] In my view, this was an accurate and sufficient charge on this issue. The language the trial judge used mirrors this court’s enumeration of the elements of the offence of tax evasion in R. v. Klundert (2004), 2004 CanLII 21268 (ON CA), 187 C.C.C. (3d) 417, at para. 47:

In most cases of tax evasion, the trial judge will adequately describe the elements of the offence by instructing the jury that they must be satisfied beyond a reasonable doubt that the accused:

• did something or engaged in a course of conduct that avoided or attempted to avoid the payment of tax imposed by the Act;

• knew there was tax imposed by the Act; and

• engaged in the conduct for the purpose of avoiding or attempting to avoid payment of tax imposed by the Act or knowing that avoiding payment of tax imposed by the Act was a virtual certain consequence of his actions. [Footnotes omitted.]

[9] Moreover, I would observe that in the context of $3,000,000 in fees and commissions over a four-year period, no income tax returns filed for those years, and not one penny of income tax or GST remitted, there is no air of reality to a potential tax avoidance versus tax evasion explanation for Mr. Mahmood’s conduct.

[10] I would dismiss the conviction appeal.

D. Crown sentence appeal

(1) The custodial sentence

[11] The sentence imposed by the trial judge had three components – a custodial term of one year, fines totalling $687,000 (150 per cent of the tax evaded), and a ten-year period to pay the fines. The Crown challenges the first and third of these components.

[12] The Crown’s principal argument is that the sentence imposed on Mr. Mahmood was manifestly unfit; it describes Mr. Mahmood’s scheme to avoid paying taxes as “pre-planned, flagrant and massive.” Accordingly, a penitentiary sentence – indeed, one of at least three years – was required.

[13] Although I regard this as a close call on this issue, in the end I cannot say that the custodial sentence imposed by the trial judge, with comprehensive reasons and careful attention to relevant case authorities from many Canadian jurisdictions, attracts the label “manifestly unfit.”

[14] The starting point is the obvious one: appellate courts must accord substantial deference to sentences imposed by trial judges: see R. v. Shropshire, 1995 CanLII 47 (SCC), [1995] 4 S.C.R. 227, at para. 46; R. v. M.(C.A.), 1996 CanLII 230 (SCC), [1996] 1 S.C.R. 500, at paras. 90-91; and R. v. Lacasse, 2015 SCC 64, at para. 39.

[15] The trial judge carefully considered a myriad of aggravating and mitigating factors.

[16] The trial judge rejected Mr. Mahmood’s position, namely, that a conditional sentence of eight months should be imposed:

I do not find that a conditional sentence would be appropriate here.

This deliberate flouting of the law will not be prevented by a conditional sentence. Others may think that such a “mistake” is worth making given the price to pay if a non-custodial term is imposed.

[17] However, the trial judge also rejected a custodial penitentiary sentence. He pointed out that Mr. Mahmood had no criminal record, that the amount of tax evaded, although substantial, was not as high as in other reported cases, and that “[t]he arrest and conviction have been hard on both him and his family.” In my view, these are all relevant factors.

[18] In summary, the trial judge identified and weighed the relevant aggravating and mitigating factors. I might have weighed them differently, attaching more weight to the aggravating factors and the principle of general deterrence. However, that is not the role of an appellate court. As explained by Wagner J. in Lacasse, at paras. 49 and 78:

[A]n appellate court may not intervene simply because it would have weighed the relevant factors differently.

[D]etermining the weight to be given to aggravating or mitigating circumstances falls strictly within the sentencing judge’s discretion. The decision to weigh such factors in a given way is not in itself an error that opens the door to appellate intervention unless the weighing is unreasonable.

I cannot say that the trial judge’s weighing of the relevant factors was unreasonable.

[19] Before concluding, I want to comment on one aspect of the trial judge’s reasons on the nature and quantum of sentence. The trial judge said:

In some cases for which a substantial prison term was ordered, the individuals received funds from the government rather than simply failed to pay. See: R. v. Alexander Street Lofts Development Corporation Inc., 2007 ONCA 309, 86 O.R. (3d) 710, leave to appeal to S.C.C. refused, [2007] S.C.C.A. No. 378.

[20] This passage is found in the middle of a section of the reasons where the trial judge distinguishes categories of cases relied on by the Crown. There is nothing in this court’s reasons in Alexander Street Lofts to support such a distinction and I would reject it. Evasion of the payment of $475,000 in taxes is the same as wrongly obtaining $475,000 from the public purse.

(2) Time to pay fines

[21] Through a miscommunication between counsel and the trial judge, the trial judge concluded his reasons for sentence, including the imposition of fines totalling $687,000, without addressing the issue of time to pay the fines. After hearing argument on this issue, the trial judge said:

I need to address the issue of time to pay the fine… The Crown submits that Mr. Mahmood should pay within two years. The defence, ten years.

Mr. Mahmood probably has full ability to pay. Mr. Mahmood likely has the ability to pay immediately. But I am not persuaded beyond a reasonable doubt that he can do so. I accept the defence request to allow Mr. Mahmood ten years to pay the fines.

[22] The Crown contends that the trial judge applied the wrong test in dealing with this component of the sentence. I agree. In R. v. Topp, 2011 SCC 43, [2011] 3 S.C.R. 119, the court considered s. 734 of the Criminal Code which deals with fines and forfeitures. Fish J. said, at para. 24:

In determining whether the record contains sufficient evidence to “satisfy” the court that the offender can afford to pay the contemplated fine, the trial judge must be satisfied, on a balance of probabilities, of the offender’s ability to pay. [Emphasis in original.]

[23] An offender’s ability to pay is inextricably linked with the time an offender has to pay the fine. If an offender does not have the ability to pay immediately, he or she must be given sufficient time to pay that is reasonable in all the circumstances: R. v. Wu, 2003 SCC 73, [2003] 3 S.C.R. 530, at para. 31.

[24] It is obvious from the record, and from the trial judge’s reasons set out above (“probably”, “likely”), that the trial judge was persuaded on a balance of probabilities that Mr. Mahmood has the ability to pay the fines, and indeed to do so “immediately”. It follows that a ten-year period to pay the fines is completely antithetical to the purpose of s. 734 of the Code and unreasonable in all the circumstances.

[25] I would allow the appeal on this issue. The Crown did not seek to have the fines paid immediately before this court or the court below. I would therefore grant Mr. Mahmood a period of two years from the date of release of these reasons to pay the fine and any applicable surcharge.

E. Disposition

[26] I would dismiss Mr. Mahmood’s conviction appeal.

[27] I would dismiss the Crown’s appeal relating to the custodial portion of Mr. Mahmood’s sentence.

[28] I would allow the Crown’s appeal relating to the time given to Mr. Mahmood to pay the fine portion of the sentence. I would grant Mr. Mahmood two years from the date of these reasons to pay the $687,000 fine and any applicable surcharge.

Released: January 26, 2016 (“J.C.M.”)

“J.C. MacPherson J.A.”

“I agree. J. MacFarland J.A.”

“I agree. L.B. Roberts J.A.”