COURT OF APPEAL FOR ONTARIO DATE: 20210120 DOCKET: C66898

MacPherson, Tulloch and Lauwers JJ.A.

BETWEEN

Her Majesty the Queen Respondent

and

David Earle Appellant

Counsel: Richard Litkowski, for the appellant Michael Fawcett, for the respondent

Heard: December 16, 2020 by video conference

On appeal from the conviction entered on May 24, 2017 by Justice Nola E. Garton of the Superior Court of Justice, and from the sentence imposed on January 25, 2018.

Lauwers J.A.:

A. Overview

[1] The appellant was convicted of fraud over $5,000, contrary to s. 380(1) of the Criminal Code. His conviction for money laundering under s. 462.31(1)(a) of the Criminal Code was based on the same facts as the fraud and was stayed under the Kienapple principle. He was sentenced to three years in jail along with ancillary orders that included a restitution order and a fine in lieu of forfeiture order. He appeals his conviction and seeks leave to appeal sentence.

[2] For the reasons that follow I would dismiss the conviction appeal and the sentence appeal except for the victim surcharge.

B. The Factual Context

[3] The trial judge found that the appellant defrauded clients of his company, Global Precious Metals (“GPM”), of almost one million dollars over a period of about four years, from 2007-2011. She found that some of the money was used to finance other business transactions including highly speculative securities trading, the appellant’s gambling, and payments towards his personal credit card debts.

[4] The appellant learned the precious metals business as an employee of Advanced Precious Metals (“APM”), which sold physical precious metals. When he established GPM, the appellant did not use the same business model as APM, but he solicited his APM customers and used many of his old employer’s business documents.

[5] The appellant led his clients to believe that their money was being used to purchase physical precious metals. However, the trial judge found that the clients were only purchasing a notional “metal position” on GPM’s books and that GPM had no actual inventory of physical precious metals.

[6] There were 17 victims of the appellant’s fraud, seven of whom testified at the trial. The appellant acknowledged in his factum that: “In general, the clients testified that they understood that the money they deposited with GPM had been used to buy physical silver.”

[7] Eventually, in early 2011, GPM went bankrupt, leaving its clients with a net loss of $986,128.71, which the trial judge attributed to the appellant’s fraud.

[8] The trial judge found that the appellant had deceived GPM clients as to the true nature of his business through oral and material representations as well as by failing to disclose material facts. In her sentencing reasons, the trial judge summarized the ways in which she found that the appellant had deliberately misled GPM’s clients:

1. The appellant led his clients, including his former APM clients, to believe that GPM possessed an inventory of physical precious metals when the company had no such inventory;
2. He led his clients to believe that he was purchasing precious metal in accordance with their purchase at the time that the orders were made;
3. He led clients to believe that GPM was financing their precious metal purchases; and
4. He failed to advise GPM’s clients of the differences between the APM and GPM business models.

C. Issues on the Appeal

[9] The appellant raises five issues on appeal:

1. The trial judge erred in dismissing the appellant’s application under s. 11(b) of the Canadian Charter of Rights and Freedoms;
2. The trial judge erred in failing to consider the fact that the appellant sought legal advice on the viability of GPM as a factor to support his credibility and to negate the fault element of fraud;
3. The appellant received ineffective assistance of counsel;
4. The amount of restitution, and the corresponding fine in lieu of forfeiture, should be reduced based on miscalculations of the actual investor losses and the monies returned to them;
5. The victim fine surcharge should be quashed under R. v. Boudreault, 2018 SCC 58, [2018] 3 S.C.R. 599.

I will address each issue in turn.

(1) The trial judge did not err in dismissing the appellant’s s. 11(b) Charter application

[10] This case proceeded uneventfully under the principles set out by the Supreme Court of Canada in R. v. Morin, [1992] 1 S.C.R. 771. The appellant was arrested on August 15, 2012. The three-week trial was originally scheduled to start on October 13, 2015 and would have been completed well before the Supreme Court issued its tectonic decision in R. v. Jordan, 2016 SCC 27, [2016] 1 S.C.R. 631 on July 8, 2016. But the serious illness of the Crown prosecutor caused the trial to be adjourned until September 19, 2016, about ten weeks after Jordan was released.

[11] At no point before Jordan was released did defence counsel suggest that a s. 11(b) Charter application would be appropriate under Morin. However, after the release of Jordan, the defence brought a motion at the outset of trial to dismiss the case under s. 11(b) for undue delay.

[12] I begin with a review of the governing principles under Jordan, describe the trial judge’s decision dismissing the appellant’s s. 11(b) Charter application, and then apply the principles to the facts.

(a) The governing principles

[13] The Supreme Court reset the principles governing delay applications under s. 11(b) in Jordan, which became the ruling authority even for cases that were almost all the way through to trial when it was released. I will not rehearse the general principles, which were recently laid out by this court in R. v. Villanti, 2020 ONCA 755 and in the cases it cited. Instead I will focus on the “transitional exceptional circumstance” applicable to proceedings commenced before Jordan was released, as in this case.

[14] In Jordan, the Supreme Court held that the transitional exception is to be applied contextually “when the Crown satisfies the court that the time the case has taken is justified based on the parties’ reasonable reliance on the law as it previously existed” even where, as here, “the delay exceeds the [Jordan] ceiling” (emphasis in original): at para. 96, referring to Morin. The court continued: “This requires a contextual assessment, sensitive to the manner in which the previous framework was applied, and the fact that the parties’ behaviour cannot be judged strictly, against a standard of which they had no notice.” The concluding sentence is especially telling: “Of course, if the parties have had time following the release of this decision to correct their behaviour, and the system has had some time to adapt, the trial judge should take this into account.”

[15] The changes wrought by Jordan were intended to be sweeping, but not abrupt: “Ultimately, for most cases that are already in the system, the release of this decision should not automatically transform what would previously have been considered a reasonable delay into an unreasonable one”: at para. 102. The court added, at para. 98: “We rely on the good sense of trial judges to determine the reasonableness of the delay in the circumstances of each case.”

[16] The factual findings made by the trial judge in the course of a Jordan analysis are entitled to deference and can only be set aside for palpable and overriding error: R. v. Bulhosen, 2019 ONCA 600, 377 C.C.C. (3d) 309, leave to appeal refused, [2019] S.C.C.A. No. 423, at para. 73; R. v. Majeed, 2019 ONCA 422, at para. 7; and R. v. Jurkus, 2018 ONCA 489, 363 C.C.C. (3d) 246, leave to appeal refused, [2018] S.C.C.A. No. 325, at para. 25.

(b) The trial judge’s reasons

[17] The trial judge heard the application from September 19, 2016, the first day of trial, to September 22, 2016, when she dismissed the application with reasons to follow. Her detailed and lengthy reasons were released on November 24, 2017.

[18] Analytically, the trial judge proceeded in two stages. She first assessed the delay under the Jordan principles and then, taking her cue from R. v. Williamson, 2016 SCC 28, [2016] 1 S.C.R. 741, undertook the Morin analysis under the rubric of the transitional exception in Jordan. Her Morin analysis occupied nearly 15 pages.

[19] Under the Jordan analysis, the trial judge fixed the total delay from the laying of the information to the anticipated conclusion of the trial at 50 months, which is 20 months in excess of Jordan’s 30-month presumptive ceiling. She addressed five issues raised by the applicant: 1) the Crown’s inaccurate time estimate relating to the preliminary inquiry; 2) the delay in obtaining state funding for legal counsel via the Rowbotham application; 3) the delay caused by the illness of the prosecuting Crown; 4) the complexity of the case; and 5) the transitional exceptional circumstances.

(i) The inaccurate time estimate relating to the preliminary inquiry

[20] The appellant took the position that the Crown had created additional delay by underestimating the time required for the preliminary inquiry, which was planned for 11 days but spilled over to 15. He argued that the need to schedule additional days and the Crown’s unavailability meant that the delay from August 29, 2013 to January 22, 2014 was properly Crown delay, set at 4 months, 24 days.

[21] The trial judge found that the time estimates for the preliminary inquiry were done in good faith and that the delay should be treated as a discrete exceptional circumstance to be deducted from the overall delay in the amount of 4 months and 25 days.

(ii) The delay in obtaining state funding for legal counsel via the Rowbotham application

[22] Following his lawyer’s departure from private practice, and the exhaustion of his financial resources, the appellant sought an adjournment on February 27, 2014 in order to seek state funding for counsel. The appellant applied to Legal Aid Ontario and brought an application under R. v. Rowbotham (1988), 41 C.C.C. (3d) 1 (Ont. C.A.), [1988] O.J. No. 271. Legal Aid refused funding and dismissed the appellant’s final appeal on July 4, 2014. The appellant and the Crown exchanged materials on the Rowbotham application over the summer of 2014 before the Crown finally consented to state funding. The Crown provided the appellant with a funding agreement on October 15, 2014 and the parties brought the agreement before the court on October 20, 2014. The total delay relating to the appellant’s funding was therefore from February 27, 2014 to October 20, 2014.

[23] The appellant argued that the Rowbotham application took too long to process. The law is clear from R. v. Boateng, 2015 ONCA 57, 128 O.R. (3d) 372, at para. 32, that the Crown is required to note and respond to potential delays resulting from Legal Aid delays in processing. Adding the Rowbotham period as institutional delay under the Morin framework would, the appellant argued, bring the total institutional delay to 20 months, surpassing what Morin deemed acceptable.

[24] The trial judge found the delay in obtaining state funding for legal counsel via the Rowbotham application to be a discrete exceptional circumstance tied to the departure of the appellant’s lawyer, for which she deducted seven months and three days from the Jordan delay.

(iii) The delay caused by the illness of the prosecuting Crown

[25] The prosecuting Crown was hospitalized for an illness and the trial date was put off from October 8, 2015 to September 19, 2016.

[26] The Crown argued that the entire period of 11 months and 12 days should be deducted but the trial judge deducted only 7 months and 9 days, recognizing that defence counsel would have been available to start the trial earlier than the judge and the Crown.

[27] Before turning to complexity, the trial judge summarized her findings at para. 71 of her delay decision:

In summary, the total amount of time to be deducted from the 50-month delay as exceptional circumstances due to discrete events is 19 months and 8 days, and is comprised of the following time periods:

1. Four months and 25 days in relation to the “good faith” underestimating of the time required to complete the preliminary inquiry, and unforeseen events during the course of the inquiry;
2. Seven months and 4 days in relation to Mr. Earle’s Rowbotham application; and
3. Seven months and 9 days in relation to the illness of Crown counsel.

This left a Jordan delay of 30 months and 22 days, which was 22 days above the presumptive ceiling.

(iv) Complexity

[28] The trial judge concluded that the complexity of the prosecution could easily account for the remaining 22 days, bringing the delay for Jordan purposes to less than 30 months. However, the appellant argued that this was not a complex case.

[29] The trial judge rested her finding of complexity on a combination of several factors: the voluminous disclosure; the very technical nature of the case as a large scale complex fraud alleged to have occurred over a substantial period of time; and the requirement for expert evidence. She also noted that, in order to accommodate the complexity, the Crown reconfigured the prosecution to bring fewer of the complainants in as live witnesses, saving trial time.

(v) The transitional exceptional circumstance, and Morin

[30] The position of the Crown was that if the complexity of the case did not itself constitute an exceptional circumstance, then the time above the 30-month presumptive Jordan ceiling was justified as a transitional exceptional circumstance. The trial judge believed that this argument compelled her, following Williamson, to conduct a full assessment of the delay under the Morin guidelines.

[31] After an exhaustive analysis, the trial judge concluded, at para. 136, that “the total institutional delay is 12 months and 4 days, which is well below the Morin guidelines. The remainder of the 50-month delay is inherent or neutral.” She added that there was no real prejudice to the appellant because he had been released on bail two days after his arrest and his bail conditions were not particularly stringent. The trial judge concluded that “[g]iven the length of the delay, I infer that Mr. Earle has suffered some prejudice, and that his employment prospects were negatively affected by the bail condition prohibiting him from trading in securities and precious metals.” She added, at para. 144: “[a]ny prejudice to Mr. Earle is mitigated in part by the fact that most of the delay is attributed to the inherent time requirements of the case.”

[32] The trial judge concluded, at para. 161: “Based on the Morin framework, there has been no infringement of Mr. Earle’s s. 11(b) right.”

(c) The principles applied

[33] This is a case to which the transitional exceptional circumstance identified in Jordan plainly applies. Because the trial started so soon after the release of Jordan, within 10 weeks, this case did not require the intensive analysis under Jordan and then under Morin undertaken by the parties and the trial judge.

[34] In my view, before the advent of Jordan, the parties reasonably relied on the law as it previously existed under Morin. The trial judge was right to conclude, at para. 163 of her reasons, that the release of Jordan shortly before trial meant the parties had “no realistic opportunity … to adapt to the new framework, for which they had no notice.”

[35] The appellant made the same arguments before this court that he made at trial. He does not challenge the trial judge’s general approach, only her detailed calculations. In his view, the trial judge erred in categorizing state action during both the preliminary inquiry and the Rowbotham application as discrete events, although the appellant conceded that some of the seven-month delay due to Crown illness was a discrete exceptional event and therefore neutral. The appellant also conceded that about four months during the Rowbotham application could be considered neutral delay. But the appellant argued that this still left over 39 months’ delay, which is significantly above the presumptive ceiling of 30 months.

[36] I disagree. The release of Jordan did not automatically transform what would previously have been considered a reasonable delay into an unreasonable one. In any event, I take no issue with the trial judge’s determinations and calculations under Morin, to which this court must defer. The appellant has not pointed to any palpable or overriding factual errors, or any errors of law that would warrant this court’s interference. This ground of appeal should be dismissed.

(2) The trial judge did not err in her assessment of the mental element of fraud

[37] The appellant argues that the trial judge erred in failing to consider the fact that the appellant sought legal advice on GPM’s operations as a factor to support his credibility and to negate the mental element of fraud.

[38] This argument must be set into its factual and evidentiary context. In late 2007, as GPM began to experience financial difficulty, the appellant engaged the services of Frank Palmay of Lang Michener to review GPM’s documentation and business practices. Mr. Palmay prepared a memorandum of opinion on the legal adequacy of GPM’s documentation and the appellant’s way of carrying on business. For convenience I will refer to Mr. Palmay as “the author.” The memorandum was marked as a lettered exhibit for identification by the trial judge.

[39] In the memorandum, the author set out what he understood to be a “simplified version of the steps taken in the furtherance of this business,” based on the information supplied by the appellant:

• when a customer first approaches the company, the customer is asked to complete a New Client Application Form which contains Risk Factors and the Disclosure Statement both of which are signed by both the customer and the company and the company’s representative which also contains the customer acknowledgement, again signed by both the customer and the company;
• the customer can either pay the full price plus a 5% commission to the company for the precious metals purchased and take delivery of them or in lieu of delivery have the company store it at a[n] annual fee;
• alternatively, and most if not all customers, choose this, a customer finances the purchase by paying 25% of the value of the metals (plus the company’s commission) and maintains the margin based on the current price of the metal with a daily carrying charge per ounce (based on the metal) – in this case the storage charge mentioned in the previous paragraph does not apply;
• included in the documentation provided to the customer (Account Fees) is a clear stipulation that the company is acting as principal and that the client’s purchases are from precious metals of the company’s inventory;
• with one exception, none of the documentation that I have reviewed either states or, in my view, implies that either the funds received or any precious metals are held in trust for the customer – the one exception is if a customer pays for the metal and in lieu of taking delivery pays the company the annual storage fees to store it on its behalf; but I understand that this is not a practice that customers choose…

[40] The author made several statements regarding the business’s struggles in late 2007 and early 2008:

The business of the company was going along quite well until the company made a decision to trade metals on its own account. Initially these trades resulted in a gain of about $100,000 but more recently, as the price of silver increased unexpectedly, the losses are in the order of $300,000 and are subject to further fluctuation up and down depending on the price of silver…

[41] Under the heading “Advice Given,” the author gave this opinion:

Based on the facts as I understand them and based on my discussion with David Earle, it is my view that he sincerely and reasonably based on his past experience thought he was acting in the best interest of the company by embarking on the house account trades that caused the problem. I can detect no mens rea (intent) that would expose him criminally, which, of course, is one of the exclusions to the company’s indemnity. [Emphasis added.]

[42] The author advised the appellant that the corporate veil could be pierced: “if a shareholder, especially a sole shareholder, treats the company as his/her alter ego. That is, the shareholder ignores the corporate veil and deals with the company’s assets, bank accounts, etc., as if they were his/her own.” The author then stated: “I understand from David Earle that this is not the case and that the only time the company’s funds were paid to him were as reimbursement for expenses properly incurred by him for company purposes”(Emphasis added).

[43] The author concluded the memorandum with a statement that there were “ways in which the documentation could be tightened up.”

(a) The role of the memorandum at trial

[44] The key strategic question at trial was whether the author should be called to give evidence about the memorandum and the information upon which it was based. Defence counsel sought to introduce the memorandum into evidence without calling the author. His argument was that the memo was admissible and could be relied on by the appellant to negate the mental element of fraud. The Crown objected on the basis that the memorandum was inadmissible hearsay without the author’s testimony.

[45] Defence counsel sought to thread the admissibility needle in such a way as to make use of the memo for the limited purpose of showing the basis for the appellant’s subjective intent. He said: “[w]hat the [memorandum] is being tendered for is only to show exactly what Mr. Earle was told by his lawyer and it’s only relevant to the issue of what Mr. Earle thought about his situation in the business after having received that letter” (emphasis added). The colloquy on admissibility lasted several days and consumed many pages of transcript.

[46] The trial judge was eventually persuaded to allow the appellant’s examination in chief and cross-examination on the memo to proceed as a blended voir dire, leaving for later argument whether admissibility had been made out. The issue left to be briefed by counsel was whether the memo might be admitted as part of a mistake of law defence. Defence counsel had not had the opportunity to review the Crown’s material on that issue and asked for more time to do so. The trial then adjourned for a month. When it resumed, defence counsel stated that he had reviewed the case law and “if [the memo]’s not relevant to the inquiry at this point, then I’m not going to rely on it.” The trial judge did not make a ruling on the admissibility of the memo and the trial continued, with the appellant testifying.

[47] Before this court, the appellant acknowledged that “a traditional mistake of law defence was not available” but argued that the memo was relevant to the appellant’s “state of mind and general credibility,” more particularly “whether or not he had subjective knowledge that his representations were false, and to his overall credibility in denying any fraudulent intent.” Accordingly, the appellant argued, the trial judge erred in “limiting her consideration of this evidence to a mistake of law defence.”

[48] I would not give effect to this ground of appeal. The trial judge was unequivocal in her finding that the appellant knowingly deceived his clients. The memorandum does little to change that finding, particularly in light of the indicators that the appellant may have deceived the author of the memorandum as well. As I will explain, the mental element of fraud does not require the Crown to prove the appellant’s subjective intent to deceive his clients. To the extent the memorandum shows the appellant had reasons to believe he acted honestly, it is not actually responsive to any of the elements of the offence of fraud.

(b) The mental element of fraud

[49] The appellant argues that it was an error of law for the trial judge to fail to consider the memo as “a piece of circumstantial evidence in assessing the credibility of the appellant’s version of events and on the issue of the appellant’s mens rea.” He argues that the fact that he “spoke to counsel and obtained an opinion as to the structure and operation of GPM, and the manner in which GPM was organized and functioned, suggests that he did not have an intention to deceive the complainants.”

[50] This argument rests on an erroneous understanding of the mental element for fraud under s. 380 of the Criminal Code: that the Crown must prove that the appellant subjectively appreciated the dishonesty of his acts. This understanding of the mental element is precisely what the Supreme Court rejected in R. v. Zlatic, [1993] 2 S.C.R. 29, at p. 49:

As is pointed out in Théroux, [1993] 2 S.C.R. 5, released concurrently, fraud by “other fraudulent means” does not require that the accused subjectively appreciate the dishonesty of his or her acts. The accused must knowingly, i.e., subjectively, undertake the conduct which constitutes the dishonest act, and must subjectively appreciate that the consequences of such conduct could be deprivation, in the sense of causing another to lose his or her pecuniary interest in certain property or in placing that interest at risk. [Emphasis added.]

This accused knew precisely what he was doing and knew that it would have the consequence of putting his creditors’ pecuniary interests at risk.

[51] The point is stated succinctly in R. v. Eizenga, 2011 ONCA 113, 270 C.C.C. (3d) 168, at para. 81:

[A] subjective intent to mislead is not an essential element of the offence of fraud. Instead, all that is required is subjective knowledge of the prohibited act, and that the act could have as a consequence the deprivation of another.

[52] This is not the case in which to tease out the subtler nuances of the mental element of fraud because the evidence of the appellant’s intent to mislead his clients was overwhelming based on the trial judge’s findings, to which I turn in the next section. At best, the memorandum represents a lukewarm attempt to clean up GPM’s affairs. At worst, as the trial judge appears to have concluded, it was an attempt to paper over the appellant’s conscious deceptions.

(c) The trial judge’s dishonesty findings

[53] Earlier I summarized the trial judge’s dishonesty findings, which I derived from her sentencing reasons, in which she said:

In my reasons for judgment, I found that Mr. Earle deliberately misled GPM’s clients about the nature of the company’s business in the following ways:

1. Mr. Earle conveyed to clients, including his former APM clients, that GPM possessed an inventory of physical precious metals when the company had no such inventory: Reasons for Judgment, at paras. 558-650.
2. Mr. Earle conveyed to clients that he was purchasing physical precious metal in accordance with their [permission to trade] PTT orders at the time that the orders were made: Reasons for Judgment, at paras. 651-655;
3. Mr. Earle led clients to believe that GPM was financing their precious metal purchases: Reasons for Judgment, at paras. 656-675; and
4. Mr. Earle failed to distinguish between the APM and GPM business models: Reasons for Judgment, at paras. 676-704.

[54] In my view, the trial judge’s findings on the appellant’s manifest dishonesty negate any possible mitigating effect from what he understood his legal responsibilities to be after reading the memorandum. The memorandum did not accurately describe his business practices, suggesting the appellant did not provide full information to the author, in particular information about the permission to trade script that he used to trigger transactions.

[55] For the trial judge, much turned on the permission to trade or “PTT” script that the appellant read to his clients when taking an order for precious metals. The script was taken from his previous employer, APM, and provided:

EARLE: This is David Earle with Global Precious Metals. Do I have your permission to tape record this call?

GPM client: Yes.

EARLE: Today's date is (insert date) at (insert time) Toronto time. The purpose of this call is to confirm your precious metals purchase and make certain that you have a full understanding of the program. Please state your name for the record.

GPM Client: name

EARLE: Okay (insert client's name). Today you are purchasing "Y" ounces of silver. The price is $X US per ounce. The total metal value is Y x $X US dollars. There is (percentage amount) for commission for this trade. Do you understand that you are only investing approximately (between twenty and twenty-five percent) of the total metal value?

GPM Client: Yes.

EARLE: If the equity in your position ever drops to approximately fifteen percent, you'd be required to bring your equity back up to twenty percent by making a deposit or liquidating your positions. Do you understand that for each day that you do not take delivery of your precious metals, you' II be charged a carrying fee of one half cent per ounce?

GPM client: Yes.

EARLE: Today you can take delivery of your precious metals at any time by paying off the unpaid balance. You'll receive a trade confirmation from us in the mail. If you have any questions, please feel free to call us. Do I have your permission to place this trade?

GPM client: Yes.

[56] The script was identical to the APM script, except for the following addition in the GPM script: “Do you understand that for each day that you do not take delivery of your precious metals, you will be charged a carrying fee of one half cent per ounce?”

[57] The trial judge was unable to accept the appellant’s asserted belief in his own honesty. Her assessment hinged largely on the difference between the purchase of actual precious metal and the purchase of a “metal position” on GPM’s books that was not backed up by an inventory of metals. As I noted earlier, the appellant acknowledged in his factum that: “In general, the clients testified that they understood that the money they deposited with GPM had been used to buy physical silver.” However, the trial judge found:

The complainants’ belief that they were purchasing physical metal was reinforced by the PTT script, which described the purpose of the call as being “to confirm your precious metals purchase.” There was no reference in the PTT script to purchasing metal positions or obligations. Mr. Earle’s refusal to characterize a PTT transaction as anything other than a sale of precious metals, and his insistence that he was selling clients physical precious metal when he never bought any metal, was self-serving and an attempt to justify the language that he used in the script, in GPM’s materials, and in speaking to clients.

[58] In her sentencing reasons, the trial judge observed:

It was clear from the evidence of the complainants that Mr. Earle never explained to them that what they were purchasing was a “metal position.” During his testimony, Mr. Earle admitted that he never disclosed to clients that GPM did not possess any metal. He also admitted that he never told clients that GPM did not buy any metal pursuant to their PTT orders. These omissions, in the circumstances, constituted the nondisclosure of important facts and were dishonest.

[59] Could the memorandum have helped the appellant, as he now argues? It appears not from the trial judge’s reasons. She addressed the memorandum and found that it could not give the appellant the plausible deniability he sought with respect to the mental element of fraud. She expressly addressed the impact of the memorandum:

In my view, the issue of Mr. Earle’s reliance on his lawyer’s opinion would be problematic in any event because it is not known exactly what information Mr. Earle provided to the lawyer. In other words, it is not known whether the lawyer had the “whole picture” with respect to the nature of GPM’s business, the oral representations that Mr. Earle made to clients in soliciting their business, and what he omitted to tell them.

For example, it is not known whether Mr. Earle provided the lawyer with a copy of the PTT script. Mr. Earle testified that he gave him all the materials that he sent to clients. However, that would not have included the script, which states that “the purpose of this call is to confirm your precious metals purchase”, and concludes with the question, “Do I have permission to place this trade?” The script made no reference to metal positions or obligations. [Emphasis added.]

It is not known whether Mr. Earle told his lawyer that despite the many references in GPM’s materials to “GPM’s own inventory”, he never disclosed to clients that GPM did not own any physical metal and did not purchase any metal pursuant to their orders. It is not known whether Mr. Earle told his lawyer that he clearly explained the carrying fee to clients. I have found that Mr. Earle gave no such explanation to his customers.

[60] The trial judge summarized her conclusions on the fraud charge in her reasons for conviction:

In summary, I did not find Mr. Earle to be a credible or reliable witness. I do not believe his evidence that he did not purposely mislead clients as to the true nature of GPM's program. Mr. Earle’s evidence does not leave me with a reasonable doubt. After considering all of the evidence and the submissions of counsel, I am satisfied beyond a reasonable doubt that Mr. Earle deliberately misled the complainants by implying that GPM had an inventory of physical metals and that metal was purchased in accordance with their orders. Mr. Earle also used “other fraudulent means” by structuring his business to hide from the complainants the fact that metal would only be purchased if paid for in full.

[61] As to the requirement for the Crown to prove deprivation, the trial judge found that: “There can be no doubt that Mr. Earle knew that by not purchasing metal with his clients’ deposits, he placed their money at a risk well beyond what they had agreed to.”

[62] Defence counsel attempted to resurrect the memorandum in sentencing submissions, arguing that reliance on legal advice ought to be considered a mitigating factor on sentence. The trial judge refused on the same basis as in her reasons for conviction. She noted in her sentencing reasons:

The difficulty with this submission is that it is not at all clear from the lawyer’s letter what exactly Mr. Earle told him about the nature of GPM’s business. For example, explaining the company’s business model would entail explaining that the client was purchasing a metal position, as opposed to physical metal, and that there was no financing involved. However, in his letter, the lawyer, in setting out the relevant facts as he understood them from Mr. Earle, states “the company’s business is as a dealer of precious metals (gold, silver, platinum, and palladium)”. The lawyer was also led to believe that in most cases, “a customer finances the purchases by paying 25 percent of the value of the metals”, and that “the client’s purchases are from precious metals of the company’s inventory.” [Emphasis added.]

There is no indication in the lawyer’s letter that Mr. Earle discussed with him the fact that he never disclosed to clients that GPM had no inventory of precious metals, and that he never told them that no metal was purchased pursuant to their PTT orders – omissions that I found to be dishonest.

[63] In my view, the trial judge’s findings on the appellant’s abuse of the PTT script and the fact that he did not give a copy of the script to the author fatally undermined the memorandum’s cogency on the issue of the mental element of fraud. I note as well the author’s statement in the memorandum: “I understand from David Earle that … the only time the company’s funds were paid to him were as reimbursement for expenses properly incurred by him for company purposes.” This statement does not survive the trial judge’s finding that some of the money was used to finance other business transactions including highly speculative securities, the appellant’s gambling, and payments towards his personal credit card debts.

[64] In short, the trial judge did not misapprehend the relevance and usefulness of the memorandum in assessing whether the Crown had proven the mental element of fraud on the appellant’s part. The evidence of the appellant’s fraud was overwhelming. It is reinforced by the appellant’s affidavit on the ineffective assistance of counsel argument, to which I now turn.

(3) The assistance of trial counsel was not ineffective

[65] The appellant argues that he received ineffective assistance from trial counsel. I address this argument after setting out the governing principles.

(a) The governing principles

[66] The procedure for advancing a claim that trial counsel provided ineffective assistance is well known. The rules are set out in the Practice Direction Concerning Criminal Appeals at the Court of Appeal for Ontario, dated March 2017 (formerly the Protocol Regarding Allegations of Incompetence of Trial Counsel in Criminal Cases). The burden rests on the appellant to establish: the facts on which the claim is based; the incompetence of the representation; and that the incompetent representation resulted in a miscarriage of justice. See R. v. Joanisse (1995), 102 C.C.C. (3d) 35 (Ont. C.A.), [1995] O.J. No. 2883, per Doherty J.A., at para. 69.

[67] The appeal record on a claim for ineffective assistance of counsel typically includes the affidavit and cross-examination of trial counsel. While the Practice Direction does not specifically require it, an affidavit is expected because it will almost certainly become the central document in any ineffective assistance claim: R. v. Archer (2005), 202 C.C.C. (3d) 60 (Ont. C.A.), [2005] O.J. No. 4348, per Doherty J.A., at para. 165.

[68] Either the Crown or the defence might elicit trial counsel’s affidavit. However, as Doherty J.A. explained in Archer, at para. 164, basing himself on the prior Protocol, this responsibility will often fall to the Crown as a practical matter because trial counsel is not a party to the appeal. Part of the court’s concern is to ensure that trial counsel whose professional conduct is being impugned has an opportunity to explain the strategic and other decisions made during the course of the trial. Doherty J.A. explained in Archer, at para 165:

The Protocol contemplates that the court will have before it all available information relating to the allegations of ineffective assistance of trial counsel. Trial counsel’s version of the relevant events is obviously crucial. This court expects that trial counsel will fully address the allegations made by the appellant. [Emphasis added.]

[69] However, the Crown is not compelled to seek out and file trial counsel’s affidavit. To the contrary, an appellant’s failure to fully engage in the process established by the Practice Direction permits the court to draw an adverse inference about the true value of the evidence that the appellant argues would have changed the course of the trial. The appellant’s reluctance to follow the procedure can be seen as an admission that the more robust fact-finding process of the Practice Direction, including an affidavit by trial counsel and cross-examination, might weaken rather than strengthen the claim of ineffective assistance: R. v. Elliott (1975), 28 C.C.C. (2d) 546 (Ont. C.A.), [1975] O.J. No. 1185 (C.A.), per Kelly J.A., at para. 6.

(b) The principles applied

[70] The appellant has not supplied an affidavit from trial counsel or a will-say statement from the author of the memorandum. He has only provided his own affidavit and the author’s memorandum. The appellant pointed out that he was not cross-examined on his affidavit, to which the Crown filed no responding materials, implying that his version of events must therefore be accepted by this court.

[71] I disagree. In his affidavit, the appellant states that he was “surprised and upset” when defence counsel decided not to call the author of the memorandum as a witness. He asserts that he repeatedly asked trial counsel to reconsider and to call the author as a witness but trial counsel refused.

[72] Seen in context, the appellant’s affidavit is revelatory. In it, he recounts a conversation with trial counsel, in which he says he pressed his request to have the author testify. The reason trial counsel gave, which the appellant quotes, is telling: “[Trial counsel] said that since Mr. Palmay did not know about the PTT, there was no reason to call him.”

[73] The difficulty for the appellant is that, as noted earlier, the PTT script played a critical role in the trial judge’s reasons for conviction because it substantiated the appellant’s clear dishonesty to both his clients and to the author of the memorandum. Given that he did not provide a copy of the PTT script to the lawyer in seeking the legal opinion as to the adequacy of his business practices, introducing the lawyer as a witness would have highlighted the appellant’s catastrophic omission. Put another way, I suspect that the appellant has not provided the author’s will-say on appeal for the same reason that the author was not called at trial: the author would only testify that the memorandum was based on incomplete information.

[74] In my view, this is a case in which this court can and should draw an adverse inference against the appellant for failing to file trial counsel’s affidavit and a will-say statement from the author of the memorandum. His failure to produce materials that are routinely filed in ineffective assistance claims leaves the strong impression that those materials would have been more harmful than helpful to his case. I would dismiss the appellant’s claim that he was ineffectively assisted by trial counsel.

(4) The Sentence Appeal

[75] The appellant does not appeal the three-year custodial element of the sentence but the quantum of the restitution order in the amount of $986,128.71, a fine in lieu of forfeiture in the same amount, and the $200 victim fine surcharge.

[76] The appellant argues that the restitution order, properly calculated to take account of several factors including the investors’ ability to take advantage of capital losses on their income taxes, should be reduced from $986,128.71 to $502,454.36, as should the amount of the fine. The appellant offered no evidence in support of this re-calculation. There is no factual basis on which to disturb the trial judge’s calculation of the losses suffered by the clients.

[77] The Crown agrees that the victim fine surcharge must be set aside. Accordingly, I would grant leave to appeal sentence and would otherwise dismiss the sentence appeal except for the victim fine surcharge.

Released: January 20, 2021 “JCM” “P. Lauwers J.A.” “I agree. J.C. MacPherson J.A.” “I agree. M. Tulloch J.A.”