Ontario Court of Justice

Date: 2022 06 03 Court File No.: Newmarket 4911-999-13 0168T / 13 0164T POA APPEAL

In the Matter of an appeal under clause 116(2) (a) of the Provincial Offences Act, R.S.O. 1990, c. P.33, as amended;

Parties

BETWEEN:

Her Majesty the Queen in Right of Ontario as represented by the Ministry of Finance Respondent

— AND —

1375923 Ontario Inc. o/a Le Jardin Banquet & Conference Centre Inc., aka Le Jardin Special Event Ctr Inc., aka Le Jardin Conference and Event Centre Inc., aka 622192 Ontario Ltd. o/a Chateau Le Jardin Conference and Event Venue, aka Chateau Le Jardin Inc. aka Chateau Le Jardin Catering inc., and Carlo PARENTELA aka Carmelo PARENTELA Appellants

Appearances

Before: Justice Edward Prutschi

Heard on: April 1, 2022 Reasons for Judgment released on: June 3, 2022

Counsel: Dominique Ferland........................... counsel for the Respondent, Ministry of Finance Jack Lloyd................ counsel for the Appellants, Le Jardin et al and Carlo Parentela

On appeal from convictions by Justice of the Peace Rhonda Shousterman on July 5, 2019, and from the sentence imposed on March 6, 2020.

Reasons for Judgment

PRUTSCHI J.:

[ 1 ] The Appellants were convicted of a series of tax-related offences and sentenced to jail, probation and fines. Though this appeal fails in overturning the convictions, the calculation of many of the fines was based on an extended timeframe resulting in a manifestly unfit quantum. The sentence appeal is allowed, and the fines varied as noted below. The custodial term of the sentence, and the period of custody in default of fine payment remain unchanged.

Facts

[ 2 ] Carlo Parentela, under a series of corporate names and a numbered company, owned and operated the Le Jardin banquet hall, an event venue for the hosting and catering of various social and business functions.

[ 3 ] At trial the Appellants were convicted of the following tax-related offences:

(a) 69 counts each under the Employer Health Tax Act (the “EHTA”) consisting of:

• 5 counts of failing to deliver annual returns under s. 32;
• 63 counts of failing to deliver statements and remittances under s. 35; and
• 1 count of wilfully evading tax under s. 31(5).

(b) 62 counts under the Retail Sales Tax Act (the “RSTA”) consisting of:

• 1 count of wilfully evading tax under s. 32(4)(d);
• 28 counts of making false or deceptive statements in returns under s. 32(4)(a);
• 1 count of failing to remit tax collected under s. 13(2);
• 1 count of vendor failing to collect sales tax under s. 44(2);
• 31 counts of failing to file returns within the required time period under s. 41(1);
• 1 count of operating without a vendor permit under s. 5(7); and
• 1 count of wilfully failing to register as a vendor under s. 32(4)(d).

[ 4 ] The Appellants were found to have failed to remit retail sales tax (RST) collected in the amount of $1,315,118.82, failure to collect RST in the amount of $344,407.53 and wilfully evaded payment of employee health tax (EHT) in the amount of $294,998.65.

[ 5 ] The failure to remit collected RST attracted a sentence of 18 months jail and a fine of $1,315,118.82 (equal to the amount of tax collected but not remitted). A concurrent 18-month jail sentence was imposed for the 28 counts of false or deceptive returns and the wilful evasion of tax. The failure to collect RST resulted in a fine of $344,407.53 (equal to the amount of tax that should have been collected but was not). The failure to file returns, the filing of late returns, and operating the business without a vendor permit resulted in fines of $887,950, $103,550 and $89,800 respectively. The charge of wilfully failing to register as a vendor was stayed.

[ 6 ] The wilful evasion of EHT attracted a sentence of 3 months jail consecutive to the RST penalty along with a fine of $294,998.65 (equal to the amount of EHT evaded). The failure to deliver annual returns and the failure to deliver statements / remittances resulted in further fines of $495,600 and $6,433,350.

[ 7 ] Mr. Parentela was additionally subject to probation for two years following his incarceration. Suspended sentences were registered against the corporations.

[ 8 ] Mr. Parentela began his involvement with the Le Jardin banquet hall in 1985 working in the family business. In 2009 he took over as sole director and officer of his parents’ company, Parentela Holdings Ltd., which owned the property on which the banquet hall is located. At all the relevant times Mr. Parentela was the owner and director of Le Jardin. He was the sole person with signing authority over financial matters.

[ 9 ] Mr. Parentela was aware from his past experience with the company of his responsibility to collect and pay both RST and EHT. For some time he was the one who arranged these payments by cheque or bank draft. No remittances were made for EHT after 2006 and none were made for RST after September 2009.

[ 10 ] Sales were recorded for Le Jardin using software called Sales Logix. Excel spreadsheets produced by Sales Logix were found on Mr. Parentela’s hard drive and he was the only person with administrative access to the Sales Logix software. The Sales Logix Excel record showed that, during the relevant time period, Le Jardin realized $32,690,162.53 in sales revenue yet reported only $13,688,629.32 on its RST returns.

[ 11 ] Though other staff were employed by Mr. Parentela (Mara Vanin as bookkeeper, Orlando Catala and Andrew Walsh as tax consultants), no one other than Mr. Parentela himself had access to the Sales Logix software. Similarly, Mr. Parentela was the only person to deal in cash receipts or make cash payments. Incoming cash was deposited into a mail slot connected to a “safe room” adjacent to Mr. Parentela’s office. Access to this safe room was restricted by way of biometric thumbprint to Mr. Parentela.

[ 12 ] Le Jardin’s payroll records showed $17,128,136.31 paid out to employees between January 1, 2007, and July 31, 2012. Le Jardin issued annual T4s to less than 15% of its employees. Hourly employees were paid bi-weekly in cash without source deductions. Even where T4s were issued, these did not include bonuses or commissions paid to salaried staff. The cash used to pay employees was supplied by Mr. Parentela. Despite the size of Le Jardin’s payroll, the company filed no EHT returns nor made any EHT remittances since 2006.

Issues on Appeal

[ 13 ] The Appellants raise eight distinct grounds of appeal from conviction while also appealing their sentence. These are categorized as follows:

(1) The Kienapple principle; (2) Failure to categorize certain provisions as mens rea offences; (3) Failure to address the defence of due diligence; (4) Improper arraignment; (5) Errors in the qualification and weight of the defence expert witness; (6) Section 11(b) unreasonable delay; (7) Improper reliance on the witness, Mara Vanin; (8) Recusal of the Justice of the Peace; and (9) The sentence is manifestly unfit.

The Standard of Review

[ 14 ] Prior to embarking on an assessment of the myriad grounds for appeal, it is important to set out the applicable standard of appellate review. It is well established that deference is to be shown to the factual determinations of the trial Justice of the Peace. Absent palpable and overriding error, the trial court’s findings of fact should not be interfered with. Conversely, where the trial Justice has made an error in law, the appropriate standard of review is that of correctness.

[ 15 ] Where the appeal turns on a question of mixed fact and law in which the legal principle is not readily extricable from the facts or where the issue involves the trial court’s interpretation of the evidence as a whole, deference is owed to the trier of fact.

The Kienapple Principle

[ 16 ] The Kienapple principle precludes multiple convictions for different offences where there is both a factual and legal nexus connecting the offences. Though assessment of the factual nexus is fairly straightforward, analysis of the legal nexus is more nuanced. The sharing of common elements between offences is, on its own, insufficient, to engage Kienapple. The focus of the assessment must be on determining “whether there are different elements in the offences which sufficiently distinguish them so as to foreclose application of the Kienapple rule.” Proximity between offences will only be established if there is “no additional and distinguishing element that goes to guilt” between the offences under comparison. Finally, “if a statutory provision expressly or by clear implication provides for multiple convictions for offences arising out of the same delict, the court must give effect to the legislative intention subject to a successful Charter challenge.”

[ 17 ] At the sentencing hearing the Crown submitted that the Kienapple principle applied for the convictions under RSTA sections 5(7) (operating without a vendor permit) and 32(4)(d) (failing to register as a vendor) and suggested that one of these two convictions be stayed. The Appellants took no position on this and made no submissions respecting Kienapple at all. The Justice of the Peace elected to stay the s. 32(4)(d) charge.

[ 18 ] Now, on appeal, the Appellants take a much more robust Kienapple position. Mr. Parentela argues that his conviction for tax evasion under s. 31(5) of the EHTA engages the identical factual and legal nexus as his convictions for failing to deliver annual returns under s. 32 of the EHTA and failing to deliver statements and remittances under s. 35 of the EHTA. He makes a similar argument in regard to his conviction for tax evasion under s. 32(4) (d) of the RSTA which was followed by convictions for failing to remit RST under s. 13(2) of the RSTA and making false or deceptive statements in his tax returns under s. 32(4)(a) of the RSTA.

[ 19 ] In essence the Appellants argue that the failure to deliver annual returns, statements and remittances, and the false or deceptive statements, are the mechanism by which Mr. Parentela committed the more serious offences of tax evasion under the respective acts.

[ 20 ] While this argument has some superficial merit, a careful analysis of the underlying offences created by the respective subsections in each statute clarifies why the Kienapple principle has no application here.

[ 21 ] The EHTA charges that arise under s. 32 and 35 are rooted in distinct obligations imposed on employers based on the annual remuneration of their staff. Section 32 creates an offence for failing to file an annual EHT return. The section creates no additional obligation to submit EHT payable. It is simply a strict liability offence whose actus reus is committed as soon as a taxpayer, upon whom a filing obligation exists, fails to file a return. The penalty is mandated within the section and ranges between $50-500 for each day that the annual return remains outstanding.

[ 22 ] Section 35 of the EHTA operates in conjunction with sections 2(1), 3(1) and 3(9) to impose a separate obligation upon employers with annual remuneration over $600,000 to make monthly EHT payments. Section 35 itself is a general penalty provision imposing a fine of not more than $5000 for each day that a taxpayer remains in contravention.

[ 23 ] Wilful evasion of the EHT under s. 31 addresses actions taken by an employer to circumvent its tax obligations. In the case of the Appellants, this was accomplished not only by failing to file returns or make the required payments, but by engaging in a prolonged course of conduct designed to conceal the total remuneration paid to employees. This involved grossly understating the number of salaried employees and paying a substantial number of the staff in cash without applying source deductions or issuing T4s. The true nature of remuneration which should have attracted EHT was obscured within Le Jardin’s accounting system by paying cash or issuing cheques to “cash” signed by Mr. Parentela and categorizing these payments as “Labour casual”, “Subcontracting Expense” or “Wages”.

[ 24 ] In the case of the RSTA, s. 13(2) speaks to the offence of collecting RST, yet failing to remit it. This quantum, which amounted to $1,315,118.82, has nothing to do with the amount of taxes reported by Le Jardin in its monthly RST returns. Indeed, from October 2009 to June 2019 Le Jardin made no RST returns at all yet the evidence established they continued to collect RST, a portion of which was never remitted. This is the core of the s. 13 charge.

[ 25 ] Section 32(4)(a) creates the offence of making false or deceptive statements on returns. Of the 29 returns Le Jardin filed, the evidence revealed that 28 of them understated the amount of RST actually collected. Le Jardin reported $362,649.29 in RST collected, remitted $428,164.86, yet in fact collected $1,743,284.68. The actus reus of this offence is the submission of a false entry and does not speak to how much tax, if any, was remitted.

[ 26 ] The wilful evasion of RST is codified in s. 32(4) (d) and speaks to at least two actions taken by Mr. Parentela. First, it reflects Mr. Parentela’s exclusive access to the Sales Logix data which served to conceal the true amount of RST collected from the bookkeeper and tax consultants. Second, when Mr. Parentela wound down 1375923 Ontario Inc. (operating as Le Jardin Special Event Centre) he began operating the same business under the name Le Jardin Conference and Event Centre. This new entity never applied for a vendor permit nor was the Ministry of Finance informed of the change in the operating name of the business. The failure to disclose the new operating entity was calculated to avoid the scrutiny of the RSTA including the requirements to collect, report and remit RST collected from customers. That is the essence of the s. 32(4)(d) wilful evasion charge.

[ 27 ] Thus, though the factual circumstances are interrelated, the legal nexus necessary to engage the Kienapple principle is not present. Each of the relevant offences within the EHTA and RSTA contain distinct elements that distinguish them from each other. It cannot be said that the Appellants have suffered multiple convictions arising out of a single action.

[ 28 ] Though I have found that the Kienapple principle does not serve to stay any of the charges for which the Appellants were convicted, the close correlation between the facts that give rise to each distinct offence along with the general sentencing principle of proportionality remain important considerations in determining the correct fines to apportion for each offence. This will be addressed in greater detail under the Sentence Appeal heading of these reasons.

Mens Rea vs. Strict Liability Offences

[ 29 ] The Appellants argue that the Justice of the Peace incorrectly considered the offences in section 31(5) of the EHTA and sections 13 and 44(2) of the RSTA as strict liability offences, neglecting to consider the mens rea component necessary to establish guilt.

[ 30 ] The language of s. 31(5) of the EHTA leaves no doubt that it is a mens rea offence.

Every person who wilfully in any manner evades or attempts to evade compliance with this Act or payment of tax imposed by this Act is guilty of an offence. [emphasis added]

[ 31 ] The Justice of the Peace equally left no doubt that she properly considered the mens rea for the offence in coming to her conclusions. She properly quoted the section and emphasized that a conviction required proof of “wilfully evading compliance with the Act”. She noted the wilful component of s. 31(5) in her Reasons for Conviction at paragraphs 643, 645 and 651 and again in her Reasons for Sentence at paragraph 171 where she explicitly found that:

Mr. Parentela committed a pre-meditated, protracted and extensive fraud in order to evade the payment of tax…Mr. Parentela knew that he was not providing Ms. Vanin, Mr. Catala or Mr. Walsh with the correct documents for them to prepare tax remittances. Mr. Parentala knew that Ms. Vanin had stopped working on the EHT returns post 2006…[and he] knew that he was mischaracterizing the nature of his employees’ employment to minimize EHT.” [emphasis added]

[ 32 ] With respect to sections 13 and 44(2) of the RSTA, the Justice of the Peace applied the test in Sault St. Marie and concluded that these were due diligence offences for which full mens rea did not apply. The Appellants contest that characterization.

[ 33 ] Section 13 of the RSTA reads as follows:

13(1) All taxes and all amounts collected as or on account of tax by a vendor under this Act shall, subject to subsections 2(16) and (16.3), be remitted to the Minister at the time or times and in the manner prescribed in the regulations.

13(2) Every person who contravenes subsection (1) is guilty of an offence and is liable on conviction to one or both of the following penalties…

[ 34 ] Section 44(2) of the RSTA reads as follows:

Every person who fails to collect the tax imposed by this Act is guilty of an offence and is liable on conviction to a fine equal to the amount of the tax that should have been collected as determined under subsection (3) and, in addition, an amount not less than $50 and not more than $2000.

[ 35 ] The Appellants argue by analogy from the Federal Income Tax Act (ITA), noting that the Supreme Court of Canada found income tax evasion to be a serious true criminal offence to which the mens rea standard applies. This argument however fails to recognize – as the Justice of the Peace herself correctly did – that the evasion charges under the both the RSTA and EHTA were properly subject to the mens rea standard.

[ 36 ] The regulatory offences of failure to remit and failure to collect attract the lesser strict liability standard. Unlike the evasion provisions of the ITA, sections 13 and 44 more closely resemble the ITA’s remittance provisions in s. 153(1) – provisions which have been previously categorized as regulatory. I find no error in the Justice of the Peace’s categorization. The appropriate standard was applied for each offence.

The Defence of Due Diligence

[ 37 ] The Appellants submit that the Justice of the Peace erred by failing to consider the defence of due diligence. They note, correctly, that a due diligence defence can be made out without direct defence evidence and can rest entirely on evidence brought out through cross-examination.

[ 38 ] Mr. Parentela’s case at trial rested largely on cross-examination seeking to suggest that he took all reasonable steps to ensure that taxes were properly collected, filed and remitted by virtue of the staff he hired for this purpose. He also relied on the expert testimony of Larry Joslin who conducted a financial review of Le Jardin’s books and Mr. Parentela’s actions. Neither Mr. Parentela himself, nor any other staff person for Le Jardin, testified on behalf of the defence.

[ 39 ] Far from ignoring this evidence, the Justice of the Peace addressed it directly at numerous points in her Reasons for Conviction.

• At paragraphs 561-571 she analyzes due diligence in the context of the failure to remit RST charge under s. 13 of the RSTA concluding that “I cannot find that a defence of due diligence was raised. Mr. Joslin’s testimony did not present any evidence as to whether the defendants had taken reasonable care.”
• At paragraphs 572-586 she considered due diligence in the context of the failure to collect RST contrary to s. 44(2) of the RSTA. She reviewed both the prosecution evidence and the testimony of Mr. Joslin summarizing, “I cannot conclude that the defendants acted with due diligence”.
• At paragraphs 587-595 she methodically summarized the evidence in relation to the allegations of failing to file RST returns contrary to s. 41(1) of the RSTA. This included a review of the actions of Mr. Parentela’s staff, in particular Ms. Vanin who held the role of bookkeeper. The Justice of the Peace concluded, “I heard no evidence to suggest a due diligence defence was made out.”
• At paragraphs 596-606 she addressed the charge of operating without a vendor permit contrary to s. 5(1) of the RSTA. It was Mr. Parentela who managed the numerous intertwined companies that formed the financial web for Le Jardin. The evidence that no steps were taken to notify the Ministry of the businesses’ new operating name was uncontradicted.
• At paragraphs 621-633 she dealt with the due diligence defence raised in response to allegations of failing to deliver annual EHT returns contrary to s. 32 of the EHTA. The Justice of the Peace explicitly noted Mr. Parentela’s reliance on Ms. Vanin as the core of his due diligence claim but she found, “no evidence that suggests the defendants relied upon Ms. Vanin to ensure that Le Jardin delivered annual EHT returns. Ms. Vanin testified she was not responsible for EHT…The onus is on the defendants to show due diligence. They did not.”
• At paragraphs 634-642 she commented on allegations for failing to deliver EHT statements and remittances contrary to s. 35 of the EHTA. The Justice of the Peace directly addressed the defence attack on Ms. Vanin’s testimony but found the defence claim, “is unsupported by the evidence”.
• Finally, the Justice of the Peace explicitly addressed the core of the Appellants’ due diligence argument, directly dismissing the suggestion that Ms. Vanin was relied upon to appropriately manage RST and EHT. At paragraph 423 she notes:

I cannot find that Mr. Parentela relied on Ms. Vanin and suffered as a result. I cannot find that Ms. Vanin authored the problems that bring Le Jardin and Mr. Parentela before this Court. Ms. Vanin was not the person involved in remitting RST or EHT during the charge period. That job was taken over by Mr. Catala in 2006 and then, at least insofar as RST was concerned, by Mr. Walsh in 2010. Despite holding the title of controller, she really was the go-between between Mr. Catala and Mr. Parentela, and then between Mr. Walsh and Mr. Parentela on taxation issues. The attempt to attribute fault to Ms. Vanin for a situation that was not of her making is consistent with her testimony that she would be made a scapegoat. [emphasis added]

[ 40 ] The Appellants’ due diligence claims represent an attempt to relitigate the very same defence presented at the trial. The Justice of the Peace carefully catalogued the evidence she heard over the course of the trial, including the cross-examination of prosecution witnesses and the testimony of Mr. Joslin, and reached a reasonable factual conclusion that the defence of due diligence was not supported by the evidence.

[ 41 ] In reaching that conclusion she noted Mr. Parentela’s exclusive control over the Sales Logix records, cash receipts and disbursements, and his sole signing authority. She further relied on Mr. Parentela’s withholding of fulsome sales revenue from those he hired to prepare the RST / EHT returns and his withholding of business records from the Ministry auditors. At every step and in every way, Mr. Parentela was the governing actor in recording, managing and directing records and payments for both RST and EHT.

[ 42 ] The Justice of the Peace did not ignore or diminish the defence of due diligence. She considered it and rejected it.

The Improper Arraignment

[ 43 ] The Appellants were arraigned on a total of 266 charges. In an effort to streamline the arraignment process, where there were multiple counts of a given charge the first and last counts (‘bookends’) were read out in their entirety while the balance of the counts were abbreviated to only include the actus reus and the offence dates. Despite this shortcut, the arraignment occupied two days in court. On the first of those days Mr. Parentela was self-represented though by the second day he had new counsel in place who made no objection to this procedure.

[ 44 ] The Appellants argue that the arraignment was “modified for convenience” in a manner that “fundamentally alters the scope of the count and charge” contrary to the requirements in s. 25 of the Provincial Offences Act (POA) which demands that each offence be set out in a separate count and apply to a single transaction with reference to the corresponding statutory provision.

[ 45 ] Section 124(1) of the POA forecloses a successful appeal “based on any alleged defect in the substance or form of an information…unless it is shown that objection was taken at the trial and that, in the case of a variance, an adjournment of the trial was refused although the variance had misled the appellant.” Section 124(2) continues: “Where an appeal is based on a defect in a conviction or an order, judgment shall not be given in favour of the appellant, but the court shall make an order curing the defect.”

[ 46 ] In the criminal law context, the failure to properly arraign an accused is a “procedural irregularity” which can be cured by resort to s. 686(1) (b)(iv) of the Criminal Code. Analysis of a defective arraignment should focus on whether the appellant was prejudiced by virtue of the defect. The purpose of the arraignment is to ensure that an accused is aware of the precise charges he or she is facing. Though the procedure was truncated in this case, there can be no doubt that the Appellants were fully aware of the charges they faced and suffered no prejudice by virtue of the modified arraignment process.

[ 47 ] For all the above reasons, I find that the unusual arraignment in this case does not justify overturning otherwise lawful convictions.

Qualifications and Weight for the Defence Expert Witness

[ 48 ] The Appellants contend that the Justice of the Peace erred in the limited weight she placed on the evidence of defence expert, Larry Joslin.

[ 49 ] Though she qualified Mr. Joslin as an expert in accounting and fraud examination, the Justice of the Peace found him to be “overtly partisan” (Reasons for Conviction, paragraph 425). The Justice of the Peace catalogued extensive reasons (Reasons for Conviction, paragraph 465) why she found his evidence troublesome and accorded it little weight. These reasons included:

• Joslin’s lack of knowledge of Le Jardin’s business operations;
• His failure to review all the documentation including notes from Mr. Walsh and the complete Sales Logix data;
• His “unsupported testimony” regarding alleged “inadvertent errors” by Le Jardin staff;
• His limited understanding of the application of provincial sales tax; and
• His tendency to provide legal opinions outside the scope of his expertise.

[ 50 ] The applicable weight to be accorded to a given witness is a question of fact. The Justice of the Peace at the trial is in a far better position to assess credibility and weigh expertise than an appellate court. Considerable deference is due to her findings and I see no basis to interfere with them here.

Unreasonable Delay and Section 11(b)

[ 51 ] Despite never having raised the issue of delay throughout the long and tortured history of the case at trial, the Appellants now claim a violation of s. 11(b) of the Charter for the first time on appeal. Both parties filed extensive materials laying out the relevant timelines and apportioning them in accordance with the Jordan directives for transitional cases.

[ 52 ] At first blush, the 64 months from date of charge to the conclusion of legal arguments cries out for scrutiny. Over the 26 days of testimony, the Crown called 36 witnesses and the defence called its expert. The disclosure consisted of 7 boxes of printed disclosure in addition to electronic documents and 277 exhibits were filed. The arraignment alone took two days to complete, and the parties required 8 months to complete their written submissions.

[ 5 3 ] Throughout this time, the Appellants waived 11(b) on numerous occasions both explicitly and by their conduct. This included for the review of disclosure, for ongoing resolution discussions, for additional time to permit defence counsel to be retained, for unavailability of defence counsel on proposed trial dates, for a change in counsel necessitating the adjournment of the trial, for illness of defence counsel, for illness of a defence witness, and for yet another change in defence counsel prior to sentencing. The Crown too occasioned some discreet delay requiring several adjournments to address the illness of witnesses.

[ 54 ] Though there are other systemic and discreet delays which impacted the trial at one point or another, it is abundantly clear that these were not the cause of the extraordinary delay which characterized this case. It was the Appellants themselves who authored the bulk of the delay. Were it not for their actions, the case would have concluded within the reasonable timeframe tolerated in transitional Jordan circumstances. I see no basis to stay the proceedings for unreasonable delay contrary to s. 11(b).

Improper Reliance on Testimony of Mara Vanin

[ 55 ] The Appellant’s contend that the evidence of Mara Vanin should properly have been excluded from the trial. Ms. Vanin began the case as a co-accused with Le Jardin and Mr. Parentela arising from her role as the business’ controller.

[ 56 ] The focus of the Appellants’ complaint arises from the prosecutor’s decision to stay all charges against Ms. Vanin immediately prior to her trial testimony. The decision to stay charges for a co-accused is well within the bounds of appropriate prosecutorial discretion. Such a decision does not render otherwise relevant evidence inadmissible. It goes solely to the question of credibility. While it is perfectly appropriate for the defence to question Ms. Vanin’s testimonial motivation, the issue of credibility is a factual determination over which the trial Justice of the Peace is accorded considerable deference.

[ 57 ] The Justice of the Peace conducted an extensive review of Ms. Vanin’s testimony and provided detailed reasons for finding Ms. Vanin to be a credible witness (see Reasons for Conviction paragraphs 420 and 424 for just two examples). Much of Ms. Vanin’s testimony is independently corroborated by the documentary evidence adduced at the trial. I see no basis to interfere with either the admissibility or credibility findings of the Justice of the Peace.

Was the Justice of the Peace Required to Recuse Herself?

[ 58 ] Having learned of a personal circumstance in which the Justice of the Peace was the victim in a high-profile criminal case, the Appellants contend Her Worship should have recused herself from continuing with this trial suggesting that she “may have been attending to her judicial duties in a state of emotional imbalance”.

[ 59 ] The Appellants themselves characterize this ground of appeal as “distasteful”. I would go further and characterize it as shamelessly without merit requiring no additional comment.

The Sentence Appeal

[ 60 ] The Appellants’ sentence appeal rests on three planks. First, they renew the Kienapple argument made previously, arguing that – though the custodial portion of the sentence would not change – the fines should be substantially reduced in the face of charges to be stayed. Second, they submit that the Justice of the Peace incorrectly applied aggravating factors resulting in a sentence that is manifestly unfit. Finally, Mr. Parentela argues that the period of custody in default of fine payment is unjust and seeks to substitute a probation order.

The custodial sentence for Mr. Parentela

[ 61 ] It is well established that appellate courts are to accord substantial deference to the sentencing decisions of trial justices. Interference is only appropriate where the sentence imposed is demonstrably unfit or the trial justice committed an error in principle, failed to consider relevant sentencing factors, or erroneously applied aggravating or mitigating factors.

[ 62 ] Mr. Parentela initially argued that the Justice of the Peace erred in not considering a Conditional Sentence Order (CSO). Conditional sentences are governed by section 742 of the Criminal Code. There is nothing in either the Criminal Code (CC) or the Provincial Offences Act (POA) which imports this unique sentencing provision into the RSTA or EHTA. In oral argument the Appellant properly conceded that a CSO is simply not an available sentence in these circumstances – the very same conclusion the Justice of the Peace came to when this was proposed at the sentencing hearing.

[ 63 ] In the alternative, Mr. Parentela now argues that probation should have been imposed in lieu of jail. While a probationary term is potentially available, the Justice of the Peace gave extensive reasons why she determined such a sentence was inappropriate in such a large-scale case of tax-evasion and related offences.

[ 64 ] Among the many aggravating factors Her Worship noted the following:

• The amount of tax evaded exceeds $1.6 million and Mr. Parentela personally profited from his failure to remit the taxes owing;
• She properly characterized the offences as a blatant breach of trust against the government of Ontario which impacted all residents of the province who “suffer when money that should be paid to government is not paid”;
• The offences spanned a period of over five years and involved thousands of fraudulent transactions perpetrated in a deliberate, calculated and deceptive manner; and
• The motivating factor behind the offences was greed and Mr. Parentela demonstrated no remorse, continuing to blame others for his misconduct as revealed by the Pre-Sentence Report (PSR).

[ 65 ] In mitigation, the Justice of the Peace noted the lack of any prior CC or POA record, and the letters of support filed on Mr. Parentela’s behalf. Ultimately, she found that, “[w]hile he appears to be a person of good character there is nothing especially mitigating about Mr. Parentela’s personal circumstances to warrant any leniency”.

[ 66 ] The Justice of the Peace found that these aggravating factors, along with the seriousness of the offences, suggested a very high degree of moral blameworthiness and the need for general deterrence. She characterized Mr. Parentela’s offences as a form of large-scale tax evasion which called for a lengthy term of incarceration.

[ 67 ] The Justice of the Peace correctly adopted the principles of sentencing set out in CC section 718 noting that these act as appropriate guidelines for POA offences. She also explicitly instructed herself to consider the principle of restraint before imposing a custodial sentence on a first offender. Both the RSTA and EHTA carry maximum penalties for the particular offences in question of imprisonment for two years.

[ 68 ] In her Reasons for Sentence (at para. 185) the Justice of the Peace reviewed eleven different comparable tax fraud cases. She relied upon these precedents to ground her finding that incarceration was necessary and further to guide her in setting the appropriate custodial range.

[ 69 ] Having carefully reviewed her reasons, I see no basis to interfere with the sentencing discretion afforded to the trial Justice of the Peace. The custodial sentences are affirmed as follows:

• 18 months incarceration for failing to remit tax collected under RSTA s. 13(2);
• 18 months incarceration for the offences of tax evasion and making false or deceptive statements under RSTA sections 32(4) (d) and 32(4)(a) to be served concurrently; and
• 3 months incarceration for tax evasion under section 31(5) of the EHTA to be served consecutive to the RSTA sentence for a total of 21 months jail.

Quantum of fines and Kienapple

[ 70 ] Having concluded earlier in these reasons that there are no charges subject to a Kienapple stay of proceedings, there is no automatic reduction in sentence which would result from the staying of some charges on appeal. However, as I noted earlier, the entirety of the sentence, including the sum of all the fines imposed, must still comply with the principles of proportionality and totality.

[ 71 ] Under the RSTA, failure to remit tax collected pursuant to s. 13(2) is subject to a minimum fine of 25% of the taxes owing up to a maximum fine of 200% of the taxes owing. The Justice of the Peace imposed a fine of 100% of the collected but unremitted tax. Similarly, wilful evasion of tax under the EHTA carries a fine penalty ranging from 25% to 200% of the taxes evaded. The Justice of the Peace again chose to impose a penalty of 100% of the unremitted or evaded tax.

[ 72 ] I see no reason to interfere with this appropriate exercise of her discretion. Any penalty set at less than 100% would permit the Appellants to profit from their unlawful actions. Such a result would fly in the face of the principles of sentencing. These fines will remain fixed at 100% of unremitted or evaded tax thus, the fines of $1,315,118.82 under the RSTA and $294,998.65 under the EHTA are affirmed.

[ 73 ] The penalty under the RSTA for failing to collect sales tax pursuant to s. 44(2) is a set fine equal to the amount of tax that should have been collected. In this case that amounts to $344,407.53 and this fine will remain undisturbed on appeal.

[ 74 ] Fines for the balance of the charges are based on the number of days an offender is in non-compliance. The penalty for operating without a vendor permit pursuant to RSTA s. 5(7) is a fine of not less than $100 for each day or part of a day on which the offence occurred or continued. The Justice of the Peace imposed a fine of $89,800 and neither party quarrels with this sum on appeal.

[ 75 ] For the RSTA offences under s. 41(1) (nine counts of failure to file returns and twenty-two counts of filing late returns) the fines are set at $50 for each day in default or non-compliance. For the EHTA offences under s. 32 (five counts of failure to deliver annual returns) the fine ranges from $50 to $500 for each day or portion of day that the offence occurs or continues. For EHTA s. 35 (sixty-three counts of failure to deliver statements and remittances) the fine is set at not more than $5000 per day.

[ 76 ] Mr. Parentela and Le Jardin remained in non-compliance or default of these provisions up to and including the dates of the trial. Indeed, the Appellants remain in that same position today. At the trial sentencing the Appellants took no position regarding these fines beyond agreeing with the Respondent’s submission that the end date for the calculation should be the date of arraignment.

[ 77 ] This choice of ‘end date’ has very significant ramifications for the quantum of the fines. By calculating the end date as the date of arraignment at trial, the Appellants were sentenced to fines of $887,950 for their continuing failure to file RSTA returns, $103,550 for the filing of late RSTA returns, $495,600 for failure to deliver annual EHTA returns and an astounding $6,433,350 for their failure to deliver statements and remittances.

[ 78 ] Neither party was able to explain why fine calculations accounted for continuing offences outside of the time period defined by the Information. The Justice of the Peace sought submissions from counsel on this point asking explicitly whether the fines “should be calculated as at the date of arraignment, the date the trial commenced or the date of conviction”. The parties jointly settled on the date of arraignment and the fines were calculated on that basis.

[ 79 ] It seems that neither the parties nor the Justice of the Peace considered the option of calculating the fines from the date of the offence through to the date the Information was laid. Such a calculus would see the total fines owing drop from $7,816,900 to $4,794,650.

[ 80 ] Regardless of whether the offender remained in default or non-compliance, a penalty should not be imposed for behaviour that took place after the laying of the Information. Moreover, the fines must be considered in conjunction with any custodial term imposed to ensure that the sentence, in its totality, is appropriately reflective of the broad principles of sentencing. Failure to consider the totality of the sentence is an error in principle.

[ 81 ] Where, as here, a significant custodial term is directed, the imposition of a jail sentence clearly addresses the need for denunciation and deterrence adequately without the redundancy of exorbitant fines. In their written submissions on appeal, the Respondents submitted an alternative fine calculus that would see the default period capped at 30 days for each count, rather than using a cumulative approach. This methodology is attractive in that it recognizes that many of the offences crystalize when the month in which a particular tax filing was due elapses without filing or remittance. This calculation was also supported by the Appellants.

[ 82 ] Though a 30-day cap might serve to artificially limit the daily fines that would regularly apply in these circumstances, having considered the principle of totality in the context of the jail sentences Mr. Parentela will be serving, this somewhat arbitrary approach to the accumulation of fines is more appropriate. Using this calculation, the fines for the Appellants are reduced to $13,500 for failing to file RSTA returns, $28,150 for filing late RSTA returns, $91,250 for failing to deliver annual EHTA returns and $94,500 for failing to deliver EHTA statements and remittances.

[ 83 ] To review, the adjusted fines after appeal are:

RSTA s. 13(2) failing to remit tax collected $1,315,118.82

RSTA s. 44(2) failure to collect sales tax $344,407.53

RSTA s. 41(1) failure to file returns $13,500

RSTA s. 41(1) filing late returns $28,150

RSTA s. 5(7) operating without a vendor permit $89,800

EHTA wilful evasion of tax $294,998.65

EHTA s. 32 failure to deliver annual returns $91,250

EHTA s. 35 failure to deliver statements and remittances $94,500

TOTAL FINES OWING $2,271,725

Time to Pay and Custody in Default of Fine Payment

[ 84 ] At the sentencing hearing, the parties made no submission as to the appropriate time to pay the fines. The Justice of the Peace took into account Mr. Parentela’s impending incarceration for 21 months and granted him two years from the date of his release to pay the fines and any associated surcharges. She further ordered imprisonment for an additional year should Mr. Parentela default on the fines.

[ 85 ] The Appellants argue that the 12-month period of custody to be imposed in default of fine payment, when added to the 21-month custodial sentence already imposed for the offences themselves, exceeds the statutory 2-year maximum.

[ 86 ] This submission mischaracterizes the nature of custody in default of fine payment. As the Supreme Court of Canada noted in R. v. Wu, “the purpose of imposing imprisonment in default of payment is to give serious encouragement to offenders with the means to pay a fine to make payment.” The time in default is not a part of the sentence itself and will not be acted upon in circumstances where the offender is impoverished or reasonably requires more time to pay. “Jail [is] triggered by the default, not the offence. No default, no jail.” This procedure does not violate the maximum penalties available under the statute.

[ 87 ] Though the quantum of fines has been reduced on appeal, the fines remain substantial and include nearly two million dollars of taxes owing that went unpaid. In such circumstances, the custody in default imposed by the trial Justice of the Peace remains an integral and appropriate piece of the broader sentence that creates a meaningful deterrent against non-compliance.

Conclusion

[ 88 ] For the above-noted reasons, the appeal against conviction is dismissed. The appeal against sentence is allowed in part. The custodial sentence remains unchanged at 21 months jail in total. The fines are reduced as previously noted, now totalling $2,271,725.

[ 89 ] The time to pay the fines and surcharges will remain two years from the date of Mr. Parentela’s release from custody. If the fines remain unpaid after that time, the period of custody in default of fine payment remains unchanged at 12 months in jail. The two-year probationary term and its associated conditions remain unchanged.

Released: June 3, 2022 Signed: Justice Edward Prutschi