ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CR-11-177
DATE: 2013-09-10

BETWEEN:

HER MAJESTY THE QUEEN

– and –

JAMES JONATHON GIBB

Defendant

Harutyun Apel, for the Crown
Daniel MacAdam, for the Defendant

REASONS FOR SENTENCE

MURRAY J.

[1] On June 12, 2013, this court found Mr. Gibb guilty of defrauding Brian Mounce of a sum of money exceeding $5,000 contrary to section 380(1)(a) of the Criminal Code of Canada. Mr. Gibb was unrepresented during the trial but retained Mr. Daniel MacAdam to represent him following conviction on the sentencing aspect of the case.

[2] The facts are set out in detail in the reasons for judgment and will not be repeated here. Suffice to say, the offence occurred in August, 2003, when Mr. Gibb induced Mr. Mounce to give him $200,000 to invest in what he falsely represented as a safe investment with other large and knowledgeable investors. Mr. Mounce, a retired businessman, was defrauded of $200,000. No restitution has been made.

[3] Mr. Gibb is 57 years old and appears before the court as a first time offender. According to the pre-sentence report, Mr. Gibb had a positive childhood being well provided for by his parents. He completed high school and has some postsecondary education although he did not complete his undergraduate degree. He is married but separated from his second wife in 1996. He and his spouse have a respectful relationship and she is supportive of him. Mr. Gibb is not presently in a relationship. He enjoys continued support from his family, including his mother and his sister. Mr. Gibb has worked with a number of companies in a variety of positions until 2002 when he started his own business called Micropayments. According to the pre-sentence report, Mr. Gibb has now filed for bankruptcy.

[4] The pre-sentence report indicates that Mr. Gibb views himself as the victim in this case and the person who was taken advantage of by others. He insists that he did not defraud anyone and accepts no responsibility for his actions. The author of the pre-sentence report concludes that Mr. Gibb does not appear to take matters before the court seriously, does not take responsibility for his criminal conduct and shows no regard for the victim. Mr. Gibb, in written submissions to the court, confirms much of what the probation officer asserts. He insists that he is not guilty of this fraud and blames others. He appears insensitive to the adverse impact of his conduct on the victim and on the victim's family.

[5] The court received victim impact statements from David Brian Mounce, the victim and from Mr. Mounce's two daughters, Kathy and Lauren May. Mr. Gibb was a close friend of Mr. Mounce and of the Mounce family. All statements speak of the betrayal felt by the family resulting from the fraud perpetrated on them by someone who was trusted and who was described by Mr. Mounce as a very close friend, and by Mr. Mounce's daughters as a second father. There is little doubt that the fraud perpetrated by Mr. Gibb hurt the victims both financially and emotionally. Mr. Mounce lost a substantial component of his retirement savings.

The Crown’s Position

[6] The Crown submits that only a period of imprisonment would adequately reflect the gravity of this offence and meet the sentencing objectives set out in the Criminal Code of Canada. The Crown seeks a custodial sentence of 18 to 24 months to be followed by two years of probation, a freestanding restitution order in the amount of $200,000 and a fine of $200,000 in lieu of forfeiture with a mandatory order requiring that in default of payment of the fine, Mr. Gibb shall serve a further custodial sentence of between two and three years. The Crown proposes that Mr. Gibb shall be given three years to pay the fine with the three year period commencing on the date of completion of the two-year probationary period. The Crown further seeks an order that with respect to a fine in lieu of forfeiture the Attorney General shall be required to transfer all payments received from the offender made with respect to the fine payable to the satisfaction of the restitution order.

Mr. Gibb’s Position

[7] Counsel for Mr. Gibb submits that a conditional sentence of imprisonment is appropriate followed by a probationary period with conditions including a restitution order.

Decision

[8] Mr. Gibb's counsel submitted that this case is similar to the case of R. v. Garrick, [2013] O.J. No. 1374 (Ontario Superior Court of Justice) where a conditional sentence was imposed. In R. v. Garrick, a decision of Mr. Justice Ricchetti of this court, the offender committed fraud over $5,000 with three different victims who were defrauded of approximately $139,000 in total. The Garrick case decided by Ricchetti J. - like the other cases referred to me by defence counsel - has important distinguishing features. In Garrick, the accused had been in custody for 10 months before sentence was determined and the Crown conceded that a conditional sentence would not be an unfit sentence. In the case at bar, Mr. Gibb has not spent time in custody with respect to this offence and there is no concession by the Crown that a conditional sentence would be a fit sentence. In R. v. Ali, [2001] O.J. No. 3757, Justice Hill imposed a conditional sentence in circumstances where the two accused, both first offenders, voluntarily recognized that restitution is a reasonable response to restoring victims losses and had begun the process of restitution at the time of sentencing. Both accused pleaded guilty and publicly accepted responsibility for their criminality. In R. v. Nuttycombe, [1999] O.J. No. 5350, Justice Hill imposed a conditional sentence in circumstances where the offender had made restitution, he was married with one child and expecting a second child, he supported his family and was gainfully employed. Certainly there are other cases where fraud over $5,000 has attracted a conditional sentence of imprisonment. One such case is R. v. Kirk, 2004 7197 (ON CA), [2004] O.J. No. 3442 in which the Court of Appeal substituted a conditional sentence for a nine months sentence of imprisonment which had been ordered by the trial judge. In Kirk, the Court of Appeal found that the trial judge erred in overemphasizing the need for general deterrence and denunciation on the basis that there had been a breach of trust. Mr. Kirk was a contractor and the victims entrusted Mr. Kirk with their deposit monies based on the representation that he would do the promised work, and that, in failing to perform the contract, Mr. Kirk in effect breached the trust that the homeowners placed in him. As the Court of Appeal held, the relationship between the parties was strictly commercial. Mr. Kirk was not in a position of trust and while the court acknowledged that this did not detract from the criminality of his behaviour, the facts in that case did not support a finding of "breach of trust" as an aggravating circumstance. Furthermore, the court found that Mr. Kirk was the sole provider for his new spouse and their ten-month-old child. Finally, Kirk expressed remorse for his actions. In contrast to the Kirk case where the relationship between the parties was commercial,Mr. Gibb, although not occupying a position of trust, was a trusted friend of the victim. He exploited that trust for his own gain. Mr. Gibb cultivated and nurtured the trust of Mr. Mounce and then defrauded him. Secondly, Mr. Gibb’s personal circumstances are very different. He has no dependents. Thirdly, Mr. Gibb does not express any remorse for his actions. While lack of remorse is not properly considered an aggravating factor, evidence of remorse may often justify reduction of a sentence below the level which would otherwise be appropriate for the offence committed. Finally, the magnitude of the fraud is significantly greater than in the Kirk case. In the case at bar, Mr. Mounce was defrauded of $200,000.

[9] In this case, although the offender is a first offender, there are few other facts to mitigate sentence. There was no guilty plea; there has been no recovery of the proceeds of the criminal conduct; there has been no effort at restitution; there was no motive mitigating the offender's conduct, whether a medical condition, or addiction, or other motivating cause existing other than greed or financial gain. As already noted, it is also well-established that a sentencing court may take into account in the exercise of its sentencing discretion, not as an aggravating feature of sentencing, but as the absence of a factor entitling sentence reduction, and as relevant to whether restorative objectives can be satisfied in a particular case, an offender's lack of remorse and acceptance of responsibility for his or her crime. See R. v. Sawchyn, 1981 ABCA 173, [1981] A.J. No. 26, a decision of the Alberta Court of Appeal.

[10] I agree with the Crown that in light of the seriousness of this offence, the principles of denunciation and deterrence are central to the sentencing process and a period of imprisonment is required. See R. v. Dobis, 2002 32815 (ON CA), [2002] O.J. No. 646, a decision of the Ontario Court of Appeal. The crime committed by Mr. Gibb is too serious to attract a conditional sentence of imprisonment.

[11] I have concluded that an appropriate sentence is a period of 18 months in prison to be followed by a period of probation for two years.

[12] The Crown has also submitted that this is an appropriate case for a restitution order pursuant to section 738 of the Criminal Code requiring that restitution be payable to the victim, Mr. Mounce, in the amount of $200,000. As was stated by the O.C.A. in R. v. Trac, 2013 ONCA 246, [2013] O.J. No. 1788: “Restitution orders advance the goal of rehabilitation by promoting direct accountability by the wrongdoer to the victim. Restitution orders also promote public acceptance of and support for the criminal justice system by recognizing the specific harm done to victims and by providing a convenient and inexpensive route by which victims may gain at least some redress for that harm: see R. v. Fitzgibbon, 1990 102 (SCC), [1990] 1 S.C.R. 1005, at pp. 1012-13; R. v. Popert, 2010 ONCA 89, 251 C.C.C. (3d) 30, at para. 38.”

[13] In the case at bar, Mr. Gibb has indicated in written submissions to the court that he has no money and no ability to pay and that he has filed for bankruptcy. There is no evidence from Mr. Gibb about where the money went or what he has left. There is no evidence from Mr. Gibb with respect to his ability to make restitution in the future.

[14] In R. v. Johnson, 2010 ABCA 392, [2010] A.J. No. 1445, the Alberta Court of Appeal stated as follows at para. 23:

If a perpetrator of a fraud wishes to argue on sentencing, after the Crown has proven the magnitude of the fraud and the loss to the victims, that he or she is without assets, the burden to establish that there is no money (and necessarily where it went) falls to the offender, not the Crown. This is consistent with the requirement on sentencing that the party who wishes to rely on a relevant fact has the burden of proving it: s. 724(3)(b) of the Code. As Weiler J.A. explained in R. v. Castro [2010] ONCA 718 at para. 34:

In cases of ... fraud ... I see no reason why the court should accept an offender's bald assertion that he or she has no ability to make restitution because the money "is gone" when no evidence is proffered in support of this assertion. When the victims can clearly establish that "the replacement value of the property" under s. 738(1)(a) is the amount of money taken, surely it is the offender asserting that he or she has no ability to make restitution who is in the best position to provide transparency concerning what has happened to that money. A bald assertion that the money is gone should be given no weight. Similarly, when the location of the money illegally obtained by the offender is unknown, the sentencing judge is entitled to take that fact into account with respect to ability to pay in making a restitution order ...

And further at paragraphs 29 and 30, the Alberta Court of Appeal in Johnson stated:

More important, an offender's means have limited import in cases of fraud: R. v. Cadieux 2004 ABCA 98, 346 A.R. 56 at para. 9. Depriving an offender of the fruits of his or her crime continues to be one of the overarching goals of a restitution order. Thus, ability to pay must take into consideration what disclosure an offender has made - or not made - concerning disposition of the proceeds of the crime. Further, where, as here, the case also involves a breach of trust, the paramount consideration must be the victims' claims: Castro, supra, at para. 28; and R. v. Fitzgibbon 1990 102 (SCC), [1990] 1 S.C.R. 1005 at 1014-1015. In fact, where a breach of trust is involved, a restitution order may be made even where there does not appear to be any likelihood of repayment: R. v. Yates 2002 BCCA 583, 169 C.C.C. (3d) 506 at para. 17; and R. v. Scherer (1984) 1984 3594 (ON CA), 16 C.C.C. (3d) 30 (Ont. C.A.) at 38, leave den. [2004] 2 S.C.R. x, [1984] S.C.C.A. No. 29. This is as it should be. Economic predators should not be permitted to walk away in the future from any obligations to their victims, especially where the proceeds of the fraud remain unaccounted for in whole or in part. Otherwise, crime would pay.

As for the suggestion that a civil judgment should do, what this ignores is that under s. 178(1)(a) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, a restitution order specifically survives bankruptcy. While a civil judgment arising out of fraud also survives bankruptcy under s. 178(1)(d) of the Act, the practical reality is that the victims here might well incur extra costs in any future bankruptcy proceedings to establish that the civil judgment in their favour did arise out of Johnson's fraud. The sentencing judge could reasonably conclude that it was not fair to those victims to put any such practical obstacles in their path to recovery. This was not of academic concern. Johnson had previously avoided paying his creditors when he declared bankruptcy. Therefore, in these circumstances, a separate restitution order in favor of the victims was appropriate. Had the order been part of a probation order, different considerations would have applied: R. v. Debaat (1992), 1992 459 (BC CA), 15 C.R. (4th) 226 (B.C.C.A.). But it was not.

[15] As in the case from the Alberta Court of Appeal, I agree that a restitution order should be made pursuant to section 738 of the Criminal Code requiring Mr. Gibb to make full restitution by paying $200,000 to Mr. Mounce.

[16] The Crown has also applied for an order under section 462.37(3) requiring Mr. Gibb to pay a fine in an amount equal to the value of the proceeds of crime that remains outstanding. Fraud is a “designated offence” under section 462.3(1) of the Criminal Code and engages section 462.37 providing for forfeiture of the proceeds of crime. Mr. Gibb has not repaid any of the $200,000 fraudulently obtained from Mr. Mounce. The evidence at trial established that Mr. Gibb received $200,000 from Mr. Mounce and put it in his bank account and therefore that Mr. Gibb had possession and control of the money. In R. v. Dwyer, 2013 ONCA 34, [2013] O.J. No. 277 the Court of Appeal stated at paras 24 -25:

In the circumstances, section 462.37(3) applies which provides that the court may order the payment of a fine equivalent to the value of the property. In my view, an order for a fine in lieu of forfeiture can be made under s. 462.37(3) only where the offender has possession or control of the property in question or at least had possession of the property at some point. This conclusion flows from the use of the phrase "any property of an offender" in s. 462.37(3) and the definition of "property" in s. 2. Such an interpretation is consistent with the objectives of s. 462.37, which are to deprive offenders of the proceeds of crime and ensure that they do not benefit from those proceeds: see R. v. Appleby, 2009 NLCA 6, 242 C.C.C. (3d) 229, at paras. 26, 32-33. Those objectives would not be furthered by making orders in relation to property that was never in the possession of the offender, over which the offender never had control and from which the offender did not benefit: see also R. v. Mackenzie, [2002] O.J. No. 2512 (C.J.).

[17] Section 462.37(4) requires that where payment of a fine is ordered, the Court shall impose a term of jail in default of payment consecutive to any other term of imprisonment imposed on the offender. The length of the mandatory period of imprisonment depends on the value of the property and in this case, where the amount is between $100,000 and $250,000, the Court must impose a term of imprisonment in default of payment between two and three years. As has been held by the Supreme Court of Canada in R. v. Lavigne, 2006 SCC 10, [2006] 1SCR 392, the Court may not take into account the offender's ability to pay into consideration as a basis for deciding either to impose no fine or to reduce the amount of the fine. According to Lavigne, taking into account ability to pay is not compatible with the objectives of the provisions of the Code which are intended to deprive the offender of the proceeds of his crime and deter him from committing crimes in the future.

[18] Before imposing a fine, the first question to be answered by the Court is whether the Court is satisfied that an order of forfeiture under 462.37(1) should be made with respect to property of an offender. Section 462.37(3) establishes that the Court only has jurisdiction to impose a fine if it is satisfied that an order of forfeiture against property cannot be made in respect of any property of an offender.

[19] In this case, the Crown has adduced no evidence that the property cannot be made subject to an order and that a fine is the appropriate response. For example, it has not satisfied the Court that the property cannot on the exercise of due diligence be located or that it has been transferred to a third party or that it is located outside Canada or that it has been substantially diminished in value or that it has been co-mingled with other property that cannot be divided without difficulty.

[20] However, there is a further problem with the Crown's position. The Crown seeks an order imposing a fine on Mr. Gibb in the sum of $200,000 representing the amount Mr. Gibb fraudulently obtained from Mr. Mounce. The Crown proposes that Mr. Gibb shall be given three years to pay the fine with the three year period commencing on the date of completion of the two-year probationary period. In default of payment of the fine, Mr. Gibb shall be sentenced to a term of imprisonment of not less than two years and not exceeding three years. Finally, the Crown seeks an order requiring the Attorney General to transfer to Mr. Mounce all payments received from Mr. Gibb made with respect to the fine towards satisfaction of the restitution order. The sentence sought by the Crown in this case is virtually identical to that determined appropriate by Mr. Justice McCombs in the Garrick case.

[21] With great respect to Justice McCombs in Garrick, I am not satisfied that the Court has jurisdiction to compel the Attorney General that monies received from Mr. Gibb in satisfaction of a fine shall be paid to the victim of the fraud to satisfy the restitution order. Section 462.37(1) stipulates that with respect of forfeited property, the Court shall order that property be forfeited to her Majesty to be disposed of as the Attorney General directs or otherwise dealt with in accordance with the law. There is no equivalent section with respect to a fine. However, even if one assumes that a fine, if paid, is the equivalent of forfeited property, it is clear that the Attorney General and not the Court has discretion with respect to the disposition of proceeds.

[22] The consequences of non-payment of a restitution order are set out in section 741 of the Code. Section 741(2) provides that all or any part of an amount that is ordered to be paid under section 738 may be taken out of monies found in the possession of the offender at the time of the arrest of the offender if the Court making the order, on being satisfied that ownership or other right to possession of those monies is not disputed by claimants other than the offender, so directs. In other words, the Code specifically sets out that when property of the victim is found in the possession of the offender, that property can be used to satisfy a restitution order. The Code makes no such provision for the payment of a fine.

[23] In essence what the Crown seeks is a restitution order with penal sanctions in the event of non-payment. The Crown is attempting to use section 462.37(3) indirectly as a means to compel payment of a restitution order. It is obvious based on the position taken by the Crown, that its’ principal objective is to obtain restitution of $200,000 for the victim, Mr. Mounce. This is the only rational explanation for the Crown’s asking the Court to order the Attorney General to pay monies received from Mr. Gibb in satisfaction of a fine to Mr. Mounce towards satisfaction of the restitution order. If the legislature had wanted a period of incarceration to result from nonpayment of a restitution order, it would have said so. It has not. To use the provisions of s. 462.37(3) of the Code relating to a fine with the attendant potential consequence of imprisonment in the event of default as a means to compel collection of monies owed pursuant to a restitution order does not accord with legislative intention.

[24] It is clear from Section 740 of the Code that a restitution order and an order of forfeiture or an order to pay a fine can be made by the Court at the same time. However, it is also clear from s. 740 that a Court should first make an order of restitution and then consider whether, and to what extent an order of forfeiture or an order to pay a fine is appropriate in the circumstances. By necessary implication, by asking for an order that payments in satisfaction of the fine imposed are to be directed by the Attorney General to satisfy the restitution order, the Crown concedes that the priority is for Mr. Gibb to make restitution to Mr. Mounce. By necessary implication, the Crown recognizes that both an order of restitution and the imposition of a fine could compromise the prospect of the victim being made whole pursuant to the restitution order. Otherwise, the Crown would not have requested an order that any monies collected pursuant to the imposition of a fine are to be remitted by the Attorney General to the victim. I agree that priority should be given to restitution. It is likely - given Mr. Gibb’s age - that he will not have the means or ability to comply with both the order of restitution and the order to pay the fine. I conclude that an order of restitution together with an order to pay a fine is inappropriate. The Crown's application under section 737 of the Code is therefore dismissed

Conclusion

[25] Mr. Gibb is sentenced to a period of imprisonment of 18 months.

[26] On completion of his sentence, he will be on probation for two years on the following terms: The probation order will require the mandatory terms but, in addition, will contain the following additional terms:

a) Mr. Gibb shall be prohibited from communicating directly or indirectly with Mr. Mounce or members of his family, except for purposes of paying restitution through his probation officer;

b) Mr. Gibb shall report twice monthly to his probation officer or as otherwise directed by the probation officer;

c) Mr. Gibb shall not change his address without the prior approval of his probation officer;

d) Mr. Gibb shall remain within the Province of Ontario unless he has permission in writing from his probation officer to temporarily leave the Province;

e) Mr. Gibb shall make all reasonable efforts to find and maintain employment and provide full details to his probation officer.

[27] There shall be a restitution order pursuant to section 738 of the Criminal Code ordering Mr. Gibb to pay the sum of $200,000 to Mr. Brian Mounce, the complainant/victim in this case.

[28] While in custody, Mr. Gibb shall not have any communication directly or indirectly with the victim, Mr. Mounce. This order is made pursuant to s.743.21 of the Criminal Code.

[29] Victim fine surcharge is waived.

Murray J.

Released: September 10, 2013

COURT FILE NO.: CR-11-177
DATE: 2013-09-10

ONTARIO
SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN

– and –

JAMES JONATHON GIBB

Defendant

REASONS FOR SENTENCE

Murray J.

Released: September 10, 2013