Court of Appeal for Ontario

Date: 2017-09-25

Docket: C61925

Judges: Laskin, Trotter and Fairburn JJ.A.

Between

Her Majesty the Queen Respondent

and

David Caporiccio Appellant

Counsel

For the Appellant: Peter Lindsay and Maleeka Mohamed

For the Respondent: Rachel Young

Heard: September 11, 2017

On appeal from the convictions entered by Justice Nancy L. Backhouse of the Superior Court of Justice on December 18, 2015, and from the sentence imposed on May 11, 2016.

Reasons for Decision

A. Overview

[1] The appellant was convicted in a judge alone trial of two counts of fraud over $5,000, each relating to small business loans obtained under Industry Canada's Small Business Loan Program. Under this program, loans could only be obtained for specified expenditures relating to the purchase and improvement of real or leased property or equipment. Restricting the loans to tangible items that could be recovered in the event of default allowed banks and the government to limit their exposure.

[2] It was not in dispute that the appellant was a professional loan broker and that he brokered loans for Megaplex Enterprises Inc. and Plava Consulting Inc. Nor was it in dispute that the stated purposes for which these loans were obtained was false. In fact, it was conceded that the loans were fraudulently obtained. The sole issue at trial was one of mens rea: did the appellant knowingly participate in the frauds?

[3] The trial judge found beyond a reasonable doubt that the appellant was guilty of fraud in relation to the Megaplex and Plava loans. She had a reasonable doubt as to whether the appellant was knowingly involved in a third fraudulent loan taken out by a company called Pro Sport, and entered an acquittal on that count.

[4] The appellant appeals both his conviction and sentence. We have distilled his arguments into three alleged errors that he says require a new trial: (1) the trial judge misapprehended the evidence; (2) the trial judge erred in her credibility and reliability analysis; and (3) the trial judge reversed the burden of proof. The appellant also maintains that the trial judge erred in law when she imposed sentence. He seeks leave to appeal against the sentence imposed.

B. Conviction Appeal

(1) Misapprehension of the Evidence

[5] The appellant argues that the trial judge misapprehended the evidence in two ways: (a) by finding that he was the recipient of $25,000 obtained from the Plava loan; and (b) by misconstruing the evidence of a witness.

[6] In her reasons for judgment, the trial judge correctly summarizes the evidence regarding the movement of the Plava loan money. She specifically notes that while the proceeds from the loan went to companies associated with Mr. Sabato, a friend of the appellant who was his co-accused before pleading guilty, "no funds were paid out during this period directly to Mr. Caporiccio or his companies."

[7] Despite containing a proper summary of the evidence, the reasons for judgment later state that $25,000 of the Plava loan can be traced to the appellant's company during the relevant period of time. This is incorrect. While the forensic accounting evidence suggests that within a month of loan proceeds going into a Sabato account, $25,000 was disbursed to the appellant's company, this money was traceable to the Pro Sport loan – the count upon which the appellant was acquitted.

[8] The appellant argues that this was a critical misstatement of fact that infected the trial judge's entire set of reasons. He points to other locations in the reasons where he claims that the trial judge incorrectly found that he and Mr. Sabato took the proceeds of the loans. He emphasizes a passage where the trial judge called them "major benefactors of these loans".

[9] In order to succeed on this ground of appeal, the appellant must demonstrate that the trial judge's misapprehension of evidence is more than peripheral to the reasoning process, in the sense that it is not simply part of the narrative: see R. v. Lohrer, 2004 SCC 80, [2004] 3 S.C.R. 732, at para. 2. Only where the misapprehension plays an "essential part in the reasoning process resulting in a conviction", can it be said that the verdict is not "true", in the sense that it is not based "exclusively on the evidence": R. v. Morrissey (1995), 22 O.R. (3d) 514, at p. 541.

[10] While the trial judge's misstatement of the evidence is material, it is not essential to the reasoning process resulting in conviction. The actual frauds were conceded in the sense that it was agreed that the loans were not obtained for the purposes laid out in the loan requirements. The loan registration forms themselves suggest that the loans were for the purchase or improvement of real property or immovable or leasehold improvements, and for financing leasehold improvements. Yet there was evidence that the Megaplex loan was actually for the purpose of paying for licensing rights to a soccer curriculum, and the Plava loan was largely for the purpose of expanding a concert promotion business.

[11] The question for the trial judge was whether the appellant knew that the purpose of the loans did not meet the requirements as set out by the bank.

[12] Read as a whole, the reasons for judgment make clear that this case was not about whether the appellant actually benefited from the fraudulent funds. The fraud was complete when the bank and government were put at economic risk. The trial judge found that, "Mr. Caporiccio knew that these loans did not comply from the outset and yet he proceeded with them. There is no honest basis for such conduct."

[13] Based on the conclusion that the appellant knew the loans he brokered did not comply with their stated purpose (a misrepresentation that was acted upon), it did not matter whether he ended up with money in hand. The bank and government were put at economic risk based upon the misrepresentation that the appellant – as the broker of the loan – was knowingly involved in. As such, the trial judge's misstatement that the $25,000 came from the Plava loan is not essential to the reasoning process that resulted in the appellant's conviction on the Plava count.

[14] In addition, while not essential to her finding of fraud, the trial judge's characterization of the appellant as a "major benefactor" of the loans was a finding of fact that was available to her. This observation was not dependent on the misapprehension regarding the $25,000 or the forensic accounting evidence.

[15] While there was no evidence that directly linked the appellant to the Megaplex and Plava loan money, there was other evidence upon which the trial judge could properly characterize the appellant as a "major benefactor" of the fraudulent scheme. There was evidence that the loan money flowed directly to Mr. Sabato's accounts. There was evidence that Mr. Sabato, who pled guilty prior to trial, was good friends with the appellant. There was evidence that the appellant moved his office into Mr. Sabato's home. There was evidence that a bank account belonging to Mr. Sabato disbursed money to one of the appellant's companies during the relevant time for the Megaplex loan. And there was evidence that the appellant received commissions for his brokerage work from the owners of Plava and Megaplex.

[16] In these circumstances, there was ample evidence upon which the trial judge could infer that the appellant was a "major benefactor" of the loans. Read in context, it cannot be said that she came to this conclusion only because she misapprehended the origin of the $25,000.

[17] The appellant also argues that the trial judge misapprehended the evidence of a witness named Majit Khan. The owner of Plava testified that she discussed leasing a property from Mr. Khan. The appellant claims that the trial judge incorrectly summarized Mr. Khan's evidence by stating that he testified that the owner of Plava had come to see him about leasing a property "in the future for her business".

[18] We have considered Mr. Khan's evidence. While his evidence is not a model of clarity, considering it as a whole, it was open to the trial judge to summarize it in the manner she did. In particular, Mr. Khan testified in-chief that while the Plava owner did not ask to rent the property, she asked to see it and "if she can use – in future". The trial judge did not misapprehend this evidence. If she did, it was peripheral to her reasoning process.

(2) Credibility and Reliability Issues

[19] The appellant raises concerns about the trial judge's approach to the credibility and reliability of two key Crown witnesses: the owner of Megaplex and the owner of Plava. He argues that the trial judge erred in two ways in finding the loan applicants credible and reliable: (a) by bolstering their credibility through a finding that they had no motive to lie; and (b) by failing to deal with evidence that is said to have undermined their credibility.

[20] The appellant argues that the trial judge erred by stating that the owners of Plava and Megaplex had no reason to be anything but honest in their evidence. He submits that the trial judge essentially reversed the burden of proof by requiring him to lead positive evidence of a motive to fabricate. The appellant maintains that the trial judge then used the absence of a motive to fabricate to support the credibility of the witnesses.

[21] This issue must be considered in context. The only reason that the trial judge considered whether there was a motive to fabricate is that the appellant raised the issue in his closing submissions. He argued that the subject witnesses alleged he committed a fraud because "when they defaulted on the loans" they tried to lay the blame at his feet.

[22] The reasons for judgment reflect nothing more than a response to the appellant's submission on this point. The trial judge did not reverse the burden of proof when she rejected the suggestion of motive. It was open to her to reject that the witnesses had a motive to mislead. She gave a reason for coming to this conclusion. She did not then use her rejection of a motive to fabricate as evidence supporting the credibility of the witnesses.

[23] The appellant also suggests that the trial judge erred by failing to specifically address evidence that undermined the credibility and reliability of the lead Crown witnesses. For instance, the appellant argues that the trial judge failed to consider important facts testified to by the owner of Megaplex. By way of example, he argues that the trial judge failed to deal with the witness' acknowledgment that it was possible that he had been advised that there were limitations regarding what the loan could be used for. On this point, we note that the trial judge specifically adverted to the fact that the witness agreed in cross-examination that it was possible that when he began the application process, he understood there were certain limits on how the funds could be used.

[24] As another example, the appellant claims that the trial judge failed to consider or give effect to the evidence that the owner of Megaplex picked up a large cheque made payable to one of Mr. Sabato's companies, yet could not recall this fact. Again, the trial judge essentially covered this off in her summary of the witness' evidence when she recounted that he could not recall who the cheque was made payable to.

[25] While the trial judge did not deal with every piece of evidence in the context of her credibility findings, she was not duty bound to do so. Credibility findings can be difficult to "articulate with precision", particularly bearing in mind the "complex intermingling of impressions that emerge" after a full trial: R. v. Gagnon, 2006 SCC 17, [2006] 1 S.C.R. 621, at para. 20; and R. v. Dinardo, 2008 SCC 24, [2008] 1 S.C.R. 788, at para. 26. Making credibility findings does not involve "science" and attracts a high degree of deference: see Gagnon, at para. 20; and R. v. Vuradin, 2013 SCC 38, [2013] 2 S.C.R. 639, at para. 11.

[26] No intervention is required here. The trial judge articulated why she accepted the evidence of the two main Crown witnesses.

[27] Moreover, even if her reasons left out some evidentiary points that the appellant maintains should have been confronted head-on, it is important to recall that the focus of this case did not turn on the credibility of the owners of Megaplex and Plava.

[28] While the appellant suggests that the Crown witnesses were complicit in the frauds and that the trial judge should have come to this conclusion, this would not have afforded him a defence. Whether the borrowers were complicit in the frauds or not, the question for the trial judge was whether the appellant knew that the purpose of the loans was being misrepresented when he brokered them. He was an experienced broker. He knew what small business loans could be obtained for and, conversely, what they could not be obtained for. It is on this basis that the trial judge concluded that he was knowingly involved in the frauds. This knowledge was squarely fixed in the documents contemporaneously produced at the time the loan applications were made.

(3) The Burden of Proof

[29] The appellant suggests that the trial judge reversed the burden of proof. He objects to various passages in the reasons where he claims it is clear that the trial judge required him to provide positive evidence of his innocence. We do not agree.

[30] While on a few occasions the trial judge references the fact that there was "no evidence to the contrary", taken in context this expression does not reveal a reversal of the burden of proof. At no time does the trial judge suggest that she accepts evidence because there was no evidence to the contrary. Instead, in using the impugned expression, she is simply signaling that there was no evidence contradicting certain pieces of evidence that she accepted as true. There was nothing wrong with making this observation.

[31] The appellant also claims that the trial judge erred by noting the absence of evidence supporting the appellant's position that the monies Mr. Sabato paid to the appellant's companies were extraneous to the fraudulent loans. The trial judge was not bound to find that the money disbursed to the appellant by Mr. Sabato was "clean" money. Her observation that there was no evidence supporting the defence suggestion that the monies were extraneous to the fraud is true; there was no such evidence. There was nothing wrong with her saying this. She did not reverse the burden by making this observation.

[32] Finally, the trial judge acquitted the appellant on the Pro Sport count. This acquittal provides further assurance that she was well aware of who held the burden and did not place an improper obligation on the appellant.

C. Sentence Appeal

[33] The appellant received a 90-day intermittent sentence on the Megaplex count, followed by a consecutive 12-month conditional sentence on the Plava count. Given the intermittent nature of the 90 days, she also imposed a term of probation. The parties agreed upon a restitution order in the amount of $31,500.

[34] The appellant seeks leave to appeal his sentence on the basis that the trial judge erred with respect to the principle of parity. The appellant claims that since the offences were so similar, parity demanded that a 12-month conditional sentence be imposed on both counts.

[35] We do not agree with this submission. The principle of parity, governed by s. 718.2(b) of the Criminal Code, speaks to sentences imposed on "similar offenders" for "similar offences" in "similar circumstances". This case does not require consideration of similar offenders for similar crimes, but rather the same offender for similar crimes. In arriving at an appropriate overall disposition for this offender, the trial judge was not precluded from imposing different types of sentences for the crimes committed.

[36] Sentencing is a "highly individualized exercise" and one that is owed deference: R. v. Lacasse, 2015 SCC 64, [2015] 3 S.C.R. 1089, at paras. 58-59. We see no error in principle or in the actual sentence imposed. We defer to the trial judge.

D. Conclusion

[37] The conviction appeal is dismissed. Although we grant leave to appeal the sentence, the sentence appeal is dismissed.

"John Laskin J.A."

"G.T. Trotter J.A."

"Fairburn J.A."