Her Majesty the Queen v. Rafilovich

[Indexed as: R. v. Rafilovich]

Ontario Reports

Court of Appeal for Ontario

Weiler, Hourigan and Pardu JJ.A.

August 3, 2017

137 O.R. (3d) 81 | 2017 ONCA 634

Case Summary

Criminal law — Forfeiture — Fine in lieu of forfeiture — Accused obtaining order before sentencing for release of seized funds to pay defence counsel's legal fees — Sentencing judge erring in refusing to order fine in lieu of forfeiture of those funds on ground that accused had obtained no benefit from funds other than being able to exercise his constitutional right to counsel — Section 734.7(1) providing reasonable excuse if accused not able to pay fine in lieu of forfeiture and could not be imprisoned — Criminal Code, R.S.C. 1985, c. C-46, s. 734.7(1).

The accused pleaded guilty to possession of cocaine for the purpose of trafficking and possession of property obtained by crime. He was using a condominium unit in which he had a half-interest as a drug house. In addition to drugs, the police seized a large amount of cash. Before sentencing, the accused obtained an order that the seized funds be released to pay his legal fees for the defence of the charges. The sentencing judge refused to order a fine in lieu of forfeiture of the seized funds under s. 462.37(3) of the Criminal Code on the basis that the accused had obtained no benefit from the funds other than being able to exercise his constitutional right to counsel. The Crown appealed. The trial judge allowed an application for forfeiture of "offence-related property" pursuant to s. 16(1) of the Controlled Drugs and Substances Act, S.C. 1995, c. 19. She fixed the amount of the accused's half-interest in the condominium unit at $100,000 and ordered forfeiture of that amount. The accused appealed.

Held, the Crown's appeal should be allowed; the accused's appeal should be dismissed.

The use of the word "may" in s. 462.37(3) of the Code does not give a sentencing judge a broad discretion to refuse to order a fine in lieu of forfeiture. The accused did profit from his crime, and the fact that he had spent that money, albeit for legal fees, was no bar to a fine replacing the fruits of his crime. The sentencing judge also erred when she considered that imposing a fine in lieu of forfeiture would subject the accused to a longer term of imprisonment than a similarly situated offender who had funds for his or her legal expenses or who qualified for legal aid. The purposes of forfeiture orders and fines in lieu are to extract the profits of criminal activity from offenders. They are not part of the individualized, general sentencing provisions aimed at sentencing an offender for committing a particular offence. If the accused could not afford to pay the fine in lieu of forfeiture, that is a reasonable excuse for non-payment pursuant to s. 734.7(1) and he could not be imprisoned. The trial judge made no error when she ruled that the accused could not be permitted to benefit from the proceeds of his crime and holding that he had to account for those funds even if some of them had been released to pay for counsel or for living expenses.

The sentencing judge made no error in relation to her order for the forfeiture of offence-related property. A judge is not required to embark on detailed accounting of income and expenses related to the property or fluctuations in property values, particularly where, as was the case here, counsel agreed on the value of the accused's interest in the property.

Authorities Considered

R. v. Lavigne, [2006] 1 S.C.R. 392, [2006] S.C.J. No. 10, 2006 SCC 10, 264 D.L.R. (4th) 385, 346 N.R. 160, J.E. 2006-727, 206 C.C.C. (3d) 449, 36 C.R. (6th) 55, EYB 2006-103137, 68 W.C.B. (2d) 792

R. v. Smith, [2008] S.J. No. 97, 2008 SKCA 20, [2008] 4 W.W.R. 27, 307 Sask. R. 45, 232 C.C.C. (3d) 176, 78 W.C.B. (2d) 269

Other Cases Referred To

R. v. Angelis (2016), 133 O.R. (3d) 575, [2016] O.J. No. 4735, 2016 ONCA 675, 32 C.R. (7th) 155, 340 C.C.C. (3d) 477, 133 W.C.B. (2d) 308 [Leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 484]

R. v. Wu, [2003] 3 S.C.R. 530, [2003] S.C.J. No. 78, 2003 SCC 73, 234 D.L.R. (4th) 87, 313 N.R. 201, J.E. 2004-142, 182 O.A.C. 6, 180 C.C.C. (3d) 97, 16 C.R. (6th) 289, 113 C.R.R. (2d) 297, 59 W.C.B. (2d) 138

Wilson v. R. (1993), 15 O.R. (3d) 645, [1993] O.J. No. 2523, 66 O.A.C. 219, 86 C.C.C. (3d) 464, 25 C.R. (4th) 239, 21 W.C.B. (2d) 563 (C.A.)

Statutes Referred To

Controlled Drugs and Substances Act, S.C. 1996, c. 19, ss. 2(1) [as am.], 16(1), (b), 19(3), 19.1(3)

Criminal Code, R.S.C. 1985, c. C-46, ss. 462.3(1) [as am.], 462.4(4)(c)(ii), 462.34(4), 462.37(1), (3), (4), 734.7(1)

Proceedings

APPEAL by the Crown from a refusal to order a fine in lieu of forfeiture; APPEAL by the accused from the sentence imposed by Croll J., sitting without a jury, [2013] O.J. No. 5421, 2013 ONSC 7293 (S.C.J.) for the forfeiture of offence-related property.

Counsel:

Bradley Reitz and Sarah Egan, for appellant and respondent

Gregory Lafontaine, for respondent and appellant

The judgment of the court was delivered by

Judgment

[1] Introduction

PARDU J.A.: — These appeals are about fines in lieu of forfeiture for proceeds of crime and forfeiture of offence-related property.

[2] Facts

[2] Mr. Rafilovich pleaded guilty to two counts of possession of cocaine for the purpose of trafficking and two counts of possession of property obtained by crime. The offences occurred on two separate occasions, about 13.5 months apart, in two different homes and in a vehicle. The police found tools typically associated with drug trafficking, such as a cash counting machine and scales, in one of the homes. In all, police seized 560 grams of cocaine, $41,130.51 Canadian cash and US$651 in American funds.

[3] Some four years before sentencing, Mr. Rafilovich had obtained an order that the seized funds be released to pay his legal fees for the defence of these charges pursuant to s. 462.34(4)(c)(ii) of the Criminal Code, R.S.C. 1985, c. C-46.

[3] Sentencing Judge's Decision on Fine in Lieu of Forfeiture

[4] The sentencing judge refused to order a fine in lieu of forfeiture of the seized funds previously paid to counsel. Although the proceeds of crime had been transferred to a third party, and the statutory prerequisites were met for a fine in lieu of forfeiture, the sentencing judge held that it was in her discretion whether to order fine in lieu of forfeiture because s. 462.37(3) of the Code provides that a court "may" order a fine in lieu of forfeiture. She noted the different approaches to the issue adopted by the Saskatchewan and Newfoundland Courts of Appeal, but concluded that since Mr. Rafilovich needed the money to pay for his lawyer, a fine in lieu of forfeiture was not appropriate. She wrote as follows [at paras. 65-66]:

It was necessary for the seized funds to be released to counsel as Mr. Rafilovich had no other monies available for legal fees and did not qualify for legal aid under the Ontario Legal Aid plan. Indeed, the Crown had opposed the application for the releases of funds for legal expenses, but the court at that time considered the release to be appropriate. There is no evidence to suggest that Mr. Rafilovich had other means or assets to pay his legal expenses. Mr. Rafilovich obtained no benefit from these funds other than enabling him to pay for legal representation to which he is constitutionally entitled. There is no evidence that he has squandered any other assets or chosen to divert assets to other purposes, except to pay counsel. In sum, Mr. Rafilovich did not profit from his crime; the proceeds to crime were used in their entirety to pay his legal fees pursuant to a judicial order.

Finally, as provided in s. 462.37(4), if the offender does not pay the fine, he or she is subject to imprisonment. For Mr. Rafilovich, the imprisonment would be between 12 and 18 months. This would subject Mr. Rafilovich to a longer term of imprisonment than a similarly situated offender who had funds for his or her legal expenses or who qualified for legal aid.

[Citations omitted]

[5] The Crown appeals. It submits that Mr. Rafilovich applied the proceeds of crime for his own benefit. It submits that the limited discretion provided to a sentencing judge by s. 462.37(3) is not a basis to refuse a fine in lieu of forfeiture where funds have been released to pay legal fees.

[4] Sentencing Judge's Decision on Forfeiture of Offence-Related Property

[6] The trial judge also dealt with an application for forfeiture of "offence-related property" pursuant to s. 16(1) of the Controlled Drugs and Substances Act, S.C. 1996, c. 19 ("CDSA"). Mr. Rafilovich co-owned a condominium unit with his mother — unit [number omitted] at 210 Victoria Street in Toronto. He used it for trafficking in drugs. As of the date of sentencing, his half-interest in the property had a net value of $100,000. He submits that partial forfeiture to the extent of only $55,000 should be ordered. The property was subject to a restraint order made by Forestell J. on November 10, 2008. Since that time, he had made the mortgage payments, maintained the property and collected rental income from the property. The defence argued that, under those circumstances, forfeiture of his entire interest in the property as of the date of sentencing some five years later would be disproportionate under s. 19.1(3) of the CDSA. He argued that forfeiture should be limited to, at most, the value of his equity in the property as of the date of the restraint order, which he calculated at about $55,000.

[7] The sentencing judge disagreed. She noted that while the home was not used for a grow operation, it was evident from the equipment, drugs and money found within that preparations for trafficking took place in the home. This was not a case where any person was residing in the home. In the end, the sentencing judge concluded [at para. 50]:

While the forfeiture order sought has a financial impact on Mr. Rafilovich, when this is measured against the quantity of the drugs and the evidence of commercialism in these offences, I am not persuaded that there is any disproportionality in the forfeiture of the entire value of Mr. Rafilovich's interest in the condominium.

The sentencing judge fixed the amount of Mr. Rafilovich's 50 per cent interest in the condominium unit at $100,000 and ordered forfeiture of that amount.

[8] Mr. Rafilovich appeals from this decision, renewing his argument on appeal that forfeiture should have been limited to $55,000.

A. Statutory Background: Proceeds of Crime

(1) Statutory Provisions

[9] Section 462.3(1) of the Code defines "proceeds of crime" broadly as any "property, benefit or advantage" obtained or derived, directly or indirectly as a result of the commission of a designated offence.

[10] Section 462.37(1) provides for a mandatory order of forfeiture of property that is proceeds of crime where the designated offence was committed in relation to that property.

[11] Section 462.37(3) provides that if the conditions are met for an order for forfeiture of property, but the property cannot be made subject to a forfeiture order, for example, because it cannot be located or has been transferred to a third party, a court "may order the offender to pay a fine".

[12] Section 462.37(4) mandates a term of imprisonment in default of payment of the fine in lieu of forfeiture, based on the amount of the fine. In this case, the fine in lieu of forfeiture would be between 12 and 18 months.

(2) Standard of Review

[13] This court has held that the standard of review of a decision concerning a fine in lieu of forfeiture is the usual one applicable to all sentence appeals. In R. v. Angelis (2016), 133 O.R. (3d) 575, [2016] O.J. No. 4735, 2016 ONCA 675, 340 C.C.C. (3d) 477, at para. 22, leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 484, it stated:

An order made under s. 462.37, including an order refusing to direct payment of a fine in lieu of forfeiture under s. 462.37(3), is a "sentence" within s. 673 of the Criminal Code. As an appeal from sentence, and as a discretionary order, the trial judge's conclusion is subject to deference in the absence of an error in principle, a failure to consider a relevant factor, consideration of an irrelevant factor, overemphasis of appropriate factors or a decision that is plainly unreasonable. Appellate intervention is justified only where it appears from the trial judge's decision that an error had an impact on the result.

[Citations omitted]

(3) Purpose of Forfeiture of Proceeds of Crime

[14] The purpose of the forfeiture provisions of the Criminal Code is to deprive the offender of the proceeds of his or her crime and to deter him or her from committing crimes in the future. This is different from the general sentencing provisions which aim to punish an offender for committing a particular offence. In R. v. Lavigne, [2006] 1 S.C.R. 392, [2006] S.C.J. No. 10, 2006 SCC 10, at para. 16, Deschamps J. stated:

Parliament's intention in enacting the forfeiture provisions was to give teeth to the general sentencing provisions. While the purpose of the latter provisions is to punish an offender for committing a particular offence, the objective of forfeiture is rather to deprive the offender and the criminal organization of the proceeds of their crime and to deter them from committing crimes in the future. The severity and broad scope of the provisions suggest that Parliament is seeking to avert crime by showing that the proceeds of crime themselves, or the equivalent thereof, may be forfeited.

[15] Where the property itself is no longer available for forfeiture, the court has a limited discretion to refuse to order a fine in lieu of forfeiture under s. 462.37(3) of the Code. Deschamps J. stated, at paras. 27 and 32 of Lavigne:

The effect of the word "may" cannot therefore be to grant a broad discretion. The exercise of the discretion is necessarily limited by the objective of the provision, the nature of the order and the circumstances in which the order is made.

The mere fact that the property has been used cannot therefore justify exercising the discretion to reduce the amount of the fine, especially where the property consists of cash. The fact that the offender no longer has enough money must not therefore serve as a way to avoid a fine. A fine can be ordered only if the property cannot be forfeited or if forfeiting it is impracticable. Moreover, s. 462.37(3)(d) is significant: a fine may be imposed where the property has been substantially diminished in value. The purpose of the order, to replace the property, would be thwarted if the offender could avoid the fine simply by spending the proceeds of the crime.

[16] A judge cannot transform circumstances in which a fine may be ordered instead of forfeiture into circumstances that justify not imposing a fine. Deschamps J. stated, at para. 24 (see Lavigne):

The list of circumstances in which the court may, inter alia, impose a fine instead of forfeiture also illustrates the limits of the discretion. For instance, the discretion may be exercised (a) where the property cannot, on the exercise of due diligence, be located or (b) where the property has been transferred to a third party. The list does not appear to be restrictive, given the use of the expression "in particular", which suggests that there are other circumstances that do not appear on the list. However, those circumstances must be similar in nature to the ones that are expressly mentioned. The judge could not therefore decline to impose a fine simply because the offender is no longer in possession of the property or simply because (c) the property is located outside Canada. Thus, the judge cannot transform circumstances in which a fine may be ordered instead of forfeiture into circumstances that justify not imposing a fine.

[17] The amount of the fine is intended to be equal to the value of the proceeds of crime it replaces: Lavigne, at para. 35.

B. Analysis

(1) Fine in Lieu of Forfeiture

[18] There is no doubt in the present case that the accused profited from his crime and received proceeds of crime. The fact that he has spent that money on legal fees, and that the funds have for that reason been transferred to a third party, is no basis, according to the principles enunciated in Lavigne, to refuse to impose a fine equal to the amount of proceeds of crime that were his profits he earned from his drug trafficking.

[19] An example of circumstances set out in Lavigne, at para. 28, as potentially justifying the exercise of discretion to refuse an order for a fine would be "if the offender did not profit from the crime and if it was an isolated crime committed by an offender acting alone". Those circumstances are not present here.

[20] The possibility that a court may release some of the funds before sentencing for reasonable living expenses, or reasonable business and legal expenses pursuant to s. 462.34(4) if an applicant has no other assets or means available for those purposes, is compatible with subsequently ordering a fine in lieu of forfeiture that intended to deprive the accused of the fruits earned from criminal activity. This proposition is supported by the obiter comments of Doherty J.A. in Wilson v. R. (1993), 15 O.R. (3d) 645, [1993] O.J. No. 2523 (C.A.), at p. 660 O.R.:

If a person on whose behalf funds were released to pay reasonable legal expenses is found guilty of an enterprise crime, and if the other criteria for forfeiture are met, then the entirety of the seized property including that which has been released for payment of legal fees, will be subject to forfeiture under s. 462.37. The part of the property that has been transferred to the offender's lawyer for the payment of legal fees, would, however, no longer be available for forfeiture. The sentencing judge could then turn to s. 462.37(3), and if appropriate, impose a fine on the offender in an amount equal to the fees paid to his or her lawyers. In this way the ultimate purpose of Part XII.2 would be served, while at the same time allowing the accused access to the seized property for the purposes of paying reasonable legal expenses.

[21] In my view, the sentencing judge erred in principle when she refused to order a fine in lieu of forfeiture. Mr. Rafilovich did profit from his crime. He earned over $41,000 from that activity. Following the principles enunciated in Lavigne, the fact that he has spent that money, albeit for legal fees, is no bar to a fine replacing the fruits of his crime. I agree with the views expressed in that regard by Wilkinson J.A. of the Saskatchewan Court of Appeal in R. v. Smith, [2008] S.J. No. 97, 2008 SKCA 20, 232 C.C.C. (3d) 176, at para. 103:

In R. v. Martin, a case cited by the respondent, the Court said that it could easily envisage circumstances where a fine should be imposed in an amount paid out of seized funds pursuant to judicial authorization, whether for living expenses, business expenses, or legal expenses. One circumstance was where criminal organization offences were implicated. Another circumstance was if it should later be discovered that the accused had assets that were not divulged. Another would be a case of squandering of assets as was the case in Lavigne. Consequently, the Court rejected the defence argument that the amount judicially authorized to be spent on legal fees was not "property" for the purposes of s. 462.37.

(Footnotes omitted)

[22] Furthermore, the sentencing judge erred when she considered that imposing a fine in lieu of forfeiture would subject Mr. Rafilovich to a longer term of imprisonment than a similarly situated offender who had funds for his or her legal expenses or who qualified for legal aid.

[23] The purposes of forfeiture orders and fines in lieu are to extract the profits of criminal activity from offenders. They are not part of the individualized, general sentencing provisions aimed at sentencing an offender for committing a particular offence: see Lavigne, at para. 16.

[24] Under s. 734.7(1) of the Code, a warrant of committal for the imprisonment of an offender in default of payment of a fine imposed in lieu of forfeiture shall not be issued unless the offender has the means to pay the fine but has refused to do so without reasonable excuse: see R. v. Wu, [2003] 3 S.C.R. 530, [2003] S.C.J. No. 78, 2003 SCC 73, at para. 31; and Lavigne, at para. 46. If Mr. Rafilovich does not have the means to pay the fine in lieu of forfeiture, that would constitute a reasonable excuse for non-payment under s. 734.7(1) and he could not be imprisoned.

[25] I therefore see no injustice in refusing to allow an accused to benefit from the proceeds of crime, and requiring him to account for those funds, even if some of them have been released for payment of legal fees or living expenses.

[26] Accordingly, I would vary the sentence imposed to add a fine in lieu of forfeiture in the sum of $41,131.39, plus $845, the latter being roughly equal to US$651 American dollars, for a total of $41,976.39.

[27] In default of payment of this fine, the accused is sentenced to 12 months' imprisonment.

(2) Forfeiture of Offence-Related Property

[28] "Offence-related property" is defined in s. 2(1) of the CDSA as any property,

(a) by means of or in respect of which a designated substance offence is committed,

(b) that is used in any manner in connection with the commission of a designated substance offence, or

(c) that is intended for use for the purpose of committing a designated substance offence.

[29] The appellant concedes that the 210 Victoria Street condominium unit was offence-related property.

[30] Section 16(1) of the CDSA provides that where a person is convicted of a designated offence, and the court is satisfied that any property is offence-related property, and that the offence was committed in relation to that property, the court shall order that the property be forfeited.

[31] Section 19.1(3) of the CDSA provides that, if a court is satisfied that the impact of an order of forfeiture would be disproportionate to the nature and gravity of the offence, the circumstances surrounding the commission of the offence and the criminal record, if any, of the person convicted, a court may decide not to order forfeiture of the property or part of the property.

[32] Following the sentencing judge's decision that the whole of Mr. Rafilovich's equity in the property should be forfeited, counsel for Mr. Rafilovich asked the sentencing judge to fix the value of his equity in the property at $100,000 as of the date of the sentencing hearing. If the property increased in value, he did not want this to increase the amount to be forfeited. The Crown did not oppose that request and indicated that he thought that was about right, "in that neighbourhood for sure".

[33] Mr. Rafilovich argues on appeal that the sentencing judge should have inferred from the purchase price in 2004 ($213,342.27), and an appraisal in 2012 ($325,000), that the property as a whole was worth $270,000 at the time of the restraint order of Forestell J. in November 2008. He also suggested that the indebtedness incurred to purchase the property in 2004, $25,000 for a line of credit and a mortgage of $156,030, were likely reduced to $22,000 and $135,640.20 by the time of the restraint order. He submits that the value of the equity as of the date of the restraint order was $56,500, and that, in light of his maintenance of the property and payment of the carrying expenses since the restraint order, this lesser amount should be forfeited instead of the $100,000 ordered by the trial judge. Mr. Rafilovich also rented the property. The record does not permit a precise calculation of his income and expenses related to the property.

[34] Given the agreement of all counsel as to the amount that accurately reflects the impact of the sentencing judge's forfeiture order, there is no basis to interfere with the sentencing judge's decision.

[35] Section 19(3) of the CDSA provides for forfeiture of property following conviction. An order for forfeiture of property implies the loss of property and sale by the Crown to realize the value of the property. Section 16(1)(b) specifically provides that the property is to be disposed of by a province or Canada.

[36] Here, the sentencing judge was asked to decide whether the whole or part of Mr. Rafilovich's interest in the property should be forfeited. After she made that decision, both Crown and defence counsel asked the sentencing judge to quantify the amount that should be forfeited, and they agreed to the amount. There is no basis to say that her decision that the whole of the accused's interest should be forfeited did not properly apply the principles of proportionality required.

[37] Calculation of an amount that is proportionate to the nature and gravity of the offence, the circumstances surrounding the commission of the offence and the criminal record, if any, of the accused, all non-financial considerations, is not an exact science. A sentencing judge is not to be expected to embark on a detailed accounting of income and expenses related to the property or fluctuations in the property value where, as here, no sufficient evidence was presented to the sentencing judge for consideration and counsel agreed on the value of the appellant's interest in the property.

[38] Accordingly, I would dismiss the appeal by Mr. Rafilovich from the order fixing the amount forfeit for his interest in the condominium at $100,000.

Disposition

Crown's appeal allowed; accused's appeal dismissed.

Addendum

2017 ONCA 824

October 26, 2017

[1] BY THE COURT: — The judgment released on August 3, 2017 has been amended to add to para. 26 the following.

[2] The appellant shall have two years from the date of the release of these reasons to pay the fine in lieu of forfeiture; he must pay that fine by August 3, 2019.

End of Document