Court File and Parties

COURT FILE NO.: 141/13 DATE: 2018 11 05

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN – and – JUN-CHUL CHUNG, KENNETH CHUNG and KATHLEEN CHUNG

Counsel: David King, for the Crown Jacqueline An, for Jun-Chul Chung Jill Presser, for Kathleen Chung

HEARD: October 23, 2018

Reasons for Judgment

Gray J.

[1] What is now before me is a constitutional challenge to certain parts of s.462.37(4) of the Criminal Code.

[2] In reasons for judgment dated April 9, 2018, I convicted Jun-Chul Chung, Kenneth Chung and Kathleen Chung of various offences arising out of a fraud committed through a stolen winning lottery ticket, worth $12.5 million. On September 4, 2018, I imposed sentences of imprisonment on each accused.

[3] The matter was further remanded in order to consider a request by the Crown for restitution orders, forfeiture orders, and, in the case of Jun-Chul Chung and Kathleen Chung, fines in lieu of forfeiture pursuant to s.462.37 (3) and (4) of the Code.

[4] Pursuant to s.462.37(4), the imposition of fines in lieu of forfeiture must include the imposition of specified terms of imprisonment in default of payment. Depending on the amount of the fine, the specified terms of imprisonment are required to be between defined minimum and maximum terms. Where the amount of the fine exceeds $1 million, the term of imprisonment must be not less than five years and not more than ten years.

[5] Counsel for Jun-Chul Chung and Kathleen Chung have challenged the constitutional validity of the minimum terms of imprisonment specified in s.462.37(4). Counsel for Kenneth Chung did not participate in the constitutional challenge.

Submissions

[6] The primary submissions were made by Ms. Presser, counsel for Kathleen Chung. Her submissions were adopted by Ms. An, counsel for Jun-Chul Chung.

[7] Ms. Presser points out that the system of fines in lieu of forfeiture, leading to mandatory default terms of imprisonment, is part of a scheme designed to ensure that crime does not pay. That is how it was described by the Supreme Court of Canada in R. v. Lavigne, 2006 SCC 10, [2006] 1 S.C.R. 393. In addition to the power of the court to make a restitution order under s.738 of the Code, the court may, pursuant to s.462.37, order that property that is proceeds of crime be forfeited to the Crown where an offender is convicted of a “designated offence”. In this case there is no dispute that the offences for which Jun-Chul Chung and Kathleen Chung were convicted are designated offences.

[8] Pursuant to s.462.37(3) where property cannot be made the subject of a forfeiture order, the court may order the offender to pay a fine equal to the value of the property. Pursuant to s.462.37(4) where a fine in lieu of forfeiture is required to be paid, the court shall impose, in default of payment, a term of imprisonment that varies in accordance with the amount of the fine. In each case, there is a minimum term of imprisonment set out, and a maximum term. In the case of a fine exceeding $1 million, which is the fine being sought in this case, the minimum term of imprisonment is five years and the maximum is ten years.

[9] Ms. Presser points out that there are discretionary aspects to this scheme, at both of what she terms the “front end”, and at the “back end”.

[10] Ms. Presser defines the term “front end” as the point at which the judge is deciding whether or not to impose a fine in lieu of forfeiture. At that point, according to the Supreme Court of Canada in Lavigne, the discretion of the court is very limited. For example, the court has no discretion to take into account the offender’s ability to pay in deciding whether or not to impose a fine. Furthermore, since a fine in lieu of forfeiture is not considered “punishment”, general principles of sentencing, such as rehabilitation, are not applicable. The amount of the fine is fixed by the terms of the statute. The sentencing judge has no discretion to adjust the quantum of the fine. Nor does the sentencing judge have any discretion to vary the terms of imprisonment set out in the legislation.

[11] The only real discretion exercisable by the sentencing judge at the front end is with respect to the time allowed to pay the fine. Since s.462.37(4) does not address the issue of time to pay, general principles will apply. The amount of time afforded to pay the fine should be what is reasonable in all the circumstances.

[12] Ms. Presser defines the term “back end” as being the point at which the court must consider what happens if the fine is not paid. At that point, the general provisions of the Code dealing with fines, contained in ss.734-734.8, apply with some exceptions.

[13] Section 734.7 deals with the issuance of a warrant of committal where a fine has not been paid. Such a warrant cannot be issued until the expiration of the time allowed for payment of the fine, and the court is satisfied that certain other mechanisms set out in the Code for collecting fines are not appropriate, or “[t]hat the offender has, without reasonable excuse, refused to pay the fine”. At that point, the inability to pay the fine is a “reasonable excuse”.

[14] Ms. Presser points out that the constitutional challenge is carefully tailored to focus only on the minimum terms of imprisonment fixed by s.462.37(4) of the Code. There is no challenge to the overall scheme of the system of fines in lieu of forfeiture, with terms of imprisonment in default. She notes that if the minimum terms of imprisonment are declared to be inoperative, as required by the Canadian Charter of Rights and Freedoms, the maximum terms of imprisonment set out in the subsection are not affected, and it is open to the sentencing judge to select an appropriate term of imprisonment depending on the circumstances.

[15] Ms. Presser points out that minimum terms of imprisonment have been successfully challenged in the Supreme Court of Canada in a number of cases, commencing with R. v. Smith, [1987] 1 S.C.R. 1045. More recently, the Supreme Court has considered the issue in R. v. Nur, 2015 SCC 15, [2015] 1 S.C.R. 773, and R. v. Lloyd, 2016 SCC 13, [2016] 1 S.C.R. 130.

[16] Ms. Presser submits that the Supreme Court has moved incrementally in its approach to minimum terms of imprisonment from its cautious approach in Smith to its more recent approach that suggests that minimum terms are more easily attacked under s.12 of the Charter as being cruel and unusual. Indeed, in Lloyd, McLachlin C.J.C., for the majority, stated at para. 3:

As this court’s decision in R. v. Nur, 2015 SCC 15, [2015] 1 S.C.R. 773, illustrates, the reality is that mandatory minimum sentences for offences that can be committed in many ways and under many different circumstances by a wide range of people are constitutionally vulnerable because they will almost inevitably catch situations where the prescribed mandatory minimum would require an unconstitutional sentence.

[17] Ms. Presser submits that there are a number of reasonable hypotheticals that would show that the mandatory term of imprisonment specified in s.462.37(4) is grossly disproportionate. In one example, assets held by the offender would have drastically reduced in value during the time allowed to pay the fine. In another case, the offender had no significant assets at the time of sentencing, because they had been used to subsidize gambling and drug addictions, and at the expiry of the period allowed to pay the fine he had no significant assets left notwithstanding efforts to turn his life around.

[18] Ms. Presser submits that in these and other examples, the imposition of a mandatory minimum term of imprisonment is grossly disproportionate. Thus, as required by the Charter, the mandatory minimum terms must be struck down.

[19] Ms. Presser also submits that the mandatory minimum terms are vulnerable as being contrary to s.7 of the Charter, in that they deprive the offender of any meaningful opportunity to address the appropriate penalty in the event of default, contrary to the principles of natural justice.

[20] Ms. Presser submits that the term “fundamental justice” as used in s.7 of the Charter enshrines the principles of natural justice and procedural fairness. She submits that the wholesale denial of an opportunity to meaningfully participate at the front end, in determining an appropriate penalty, contravenes s.7 of the Charter.

[21] Mr. King, counsel for the Crown, submits that there is no violation of the Charter, and the application should be dismissed.

[22] Mr. King submits that there is no violation of s.7 of the Charter. He submits that an offender has two opportunities to be heard and make submissions.

[23] The first opportunity is at the front end. At that time, the offender can make submissions on whether a fine in lieu of forfeiture ought to be imposed. While the discretion of the judge at that point is limited, as discussed in Lavigne, there is nevertheless a measure of discretion, on which the offender will have an opportunity to make submissions. Relevant factors are the nature of the offence, the role that each offender played in committing the offence, and how much money each offender possessed.

[24] At that point, the offender has a meaningful opportunity to make submissions as to the amount of default custody, within the ranges set out in s.462.37(4). He points out that in this case, the Crown will be seeking default terms in excess of the minimum terms, and the offenders will have an opportunity to make submissions on what the appropriate default terms should be.

[25] The next opportunity to make submissions is at the back end. If the fine is not paid, the offender will have an opportunity to call evidence and make submissions as to why the fine has not been paid, and whether or not a warrant of committal should issue. If the fine has been partly paid, the term of imprisonment will be proportionately reduced, as required by s.734.8 of the Code.

[26] As far as s.12 of the Charter is concerned, Mr. King acknowledges that s.462.37(4) is subject to Charter scrutiny. He acknowledges that even if a default term of imprisonment is not “punishment”, it is clearly “treatment” as contemplated in s.12.

[27] Mr. King submits that in assessing the issue under s.12 of the Charter, the court must assess the purpose of Parliament in enacting the statutory provisions. As acknowledged by Ms. Presser, the provisions of s.462.37(4) are part of a scheme designed by Parliament to ensure that crime does not pay. The provisions are enacted to encourage offenders to disgorge the profits of their crimes, and to deter others from committing similar crimes. Issues like specific deterrence and rehabilitation are dealt with at other parts of the sentencing process.

[28] Mr. King submits that the court should view with caution any hypotheticals, having regard to the purpose of the statutory provisions as a whole. He points out that in cases that deal with mandatory minimum fines, the Court of Appeal has considered the objective of the legislation in deciding whether s.12 of the Charter has been violated. He relies in particular on R. v. Tinker, 2017 ONCA 552, 136 O.R. (3d) 718 (on appeal to the Supreme Court of Canada), and R. v. Pham (2002), 167 C.C.C. (3d) 570 (Ont. C.A.).

[29] Mr. King submits that the minimum default terms of imprisonment do not result in grossly disproportionate treatment because:

a) they are tailored to the amount of money illegally taken by the offender and still outstanding; b) they are only engaged where there is willful non-compliance with the order; c) they are designed with only two principles in mind – general deterrence and making offenders disgorge the proceeds of crime; and d) other sentencing principles will be considered during the regular sentencing process.

[30] Mr. King submits that the hypotheticals relied on by Ms. Presser do not demonstrate grossly disproportionate treatment. In each case, the offender made deliberate decisions about what to do with ill-gotten gains, and the consequence was reasonably foreseeable.

[31] In addition to the cases already mentioned, authorities relied on by the parties include R. v. Angelis, 2016 ONCA 675, 133 O.R. (3d) 575; R. v. Bourque (2005), 193 C.C.C. (3d) 485 (Ont. C.A.); R. v. Wu, 2003 SCC 73, [2003] 3 S.C.R. 530; Chiang (Trustee of) v. Chiang (2009), 2009 ONCA 3, 93 O.R. (3d) 483 (C.A.); R. v. McDonald, 2018 ONCA 369, 360 C.C.C. (3d) 494; Reference Re Motor Vehicle Act (British Columbia) S.94 (2), [1985] 2 S.C.R. 486; Singh v. Canada (Minister of Employment and Immigration), [1985] 1 S.C.R. 177; R. v. Langevin (1984), 45 O.R. (2d) 705 (C.A.); Re Therrien, 2001 SCC 35, [2001] 2 S.C.R. 3; Quebec (Attorney General) v. Canada (National Energy Board), [1994] 1 S.C.R. 159; R. v. Wholesale Travel Group Inc., [1991] 3 S.C.R. 154; Carter v. Canada (Attorney General), 2015 SCC 5, [2015] 1 S.C.R. 331; R. v. Oakes, [1986] 1 S.C.R. 103; and R. v. Le (2006), 143 C.R.R. (2d) 272 (Ont. S.C.J.); aff’d 2007 ONCA 675, 161 C.R.R. (2d) 365 (Ont. C.A.).

Analysis

[32] I have attached as an Appendix the relevant provisions of the Criminal Code.

[33] As asserted or conceded by all parties, the intention of Parliament in enacting the provisions relating to fines in lieu of forfeiture was to ensure, to the degree possible, that crime does not pay. The provisions are designed to encourage offenders to disgorge ill-gotten gains. Having regard to that purpose, the fines and the minimum terms of imprisonment set out in s.462.37(3) and (4) are not intended to punish the offender. Rather, they are intended to be in aid of disgorging ill-gotten gains from offenders.

[34] It is also instructive to note that to a considerable extent, many of the general Criminal Code provisions as to fines are applicable to fines in lieu of forfeiture. That means that where a fine is paid in part, it will result in a proportionate reduction in the amount of custodial time to be served: s.734.8.

[35] If an offender requires more time to pay a fine, he or she may apply to vary the order: s.734.3.

[36] Before a warrant of committal can be applied for by the Crown, where the fine is not paid, the Crown must attempt to use other means of collecting the fine, include the non-renewal of licences or permits, and civil procedures for collection: ss.734.5 and 734.6.

[37] In the event of non-payment of the fine, the court cannot issue a warrant of committal until the time allowed for payment has expired, the mechanisms provided by ss. 734.5 and 734.6 are not considered to be appropriate, or the offender has, without reasonable excuse, refused to pay the fine: s.734.7. It is clear that inability to pay a fine is a reasonable excuse for non-payment: R. v. Wu, supra, at para. 3.

[38] It must be noted, as well, that at the time of sentencing, the court has considerable discretion as to the length of time to pay the fine that may be given by the judge.

[39] It is also instructive to compare the mandatory minimum and maximum terms of imprisonment to be imposed pursuant to s.462.37(4) with the mandatory term of imprisonment that must be imposed in any other case where a fine is levied. Sections 734 (4) and (5) require that a term of imprisonment be imposed in default of payment of a fine.

[40] In the case of a fine of $1 million in lieu of forfeiture, imposed under 462.37(4), the term of imprisonment required by s.462.37(4) (a)(vii) is at least five years and not exceeding ten years. In any other case where a fine of $1 million is imposed, s.734(5) would require the imposition of a default term of imprisonment of the lesser of 24.46 years or the maximum term of imprisonment the court could impose on conviction of the substantive offence. Once again, however, even for a term of imprisonment of that length, the offender can ask for more time to pay; the term will be reduced if partial payment of the fine is made; and a warrant of committal cannot be issued where the offender is unable to pay the fine.

[41] In the final analysis, having regard to the purpose of the challenged provisions, and their actual impact in light of other provisions of the Code, I am unable to conclude that the mandatory minimum terms of imprisonment required by s.462.37(4) of the Code are grossly disproportionate, and thus contrary to s.12 of the Charter.

[42] I have not received a great deal of assistance from the decision of Glithero J. in R. v. Le, supra. In that case, Glithero J. rejected a broad attack on the scheme of fines in lieu of forfeiture, based on s.12 of the Charter. The argument made there was not carefully tailored to focus on the mandatory terms of imprisonment as it is here. While the Court of Appeal upheld the decision, because the appeal was pursued as an in-person appeal the court decided that it was not an appropriate case in which to determine the constitutional issue.

[43] As far as the issue under s.7 of the Charter is concerned, I agree with the Crown that an offender has rights to make submissions on issues that are relevant at each stage of the proceeding, whether at the front end or the back end. The mere fact that there is a mandatory term of imprisonment does not deprive an offender of any s.7 rights. The argument is more properly left to a determination under s.12.

Disposition

[44] For the foregoing reasons, the application is dismissed.

Gray J.

Released: November 5, 2018

Appendix

Excerpts from the Criminal Code

462.3 (1) In this Part,

designated offence means

• (a) any offence that may be prosecuted as an indictable offence under this or any other Act of Parliament, other than an indictable offence prescribed by regulation, or
• (b) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in paragraph (a);

462.37 (1) Subject to this section and sections 462.39 to 462.41, if an offender is convicted, or discharged under section 730, of a designated offence and the court imposing sentence on or discharging the offender, on application of the Attorney General, is satisfied, on a balance of probabilities, that any property is proceeds of crime obtained through the commission of the designated offence, the court shall order that the property be forfeited to Her Majesty to be disposed of as the Attorney General directs or otherwise dealt with in accordance with the law.

Fine instead of forfeiture

(3) If a court is satisfied that an order of forfeiture under subsection (1) or (2.01) should be made in respect of any property of an offender but that the property or any part of or interest in the property cannot be made subject to an order, the court may, instead of ordering the property or any part of or interest in the property to be forfeited, order the offender to pay a fine in an amount equal to the value of the property or the part of or interest in the property. In particular, a court may order the offender to pay a fine if the property or any part of or interest in the property

• (a) cannot, on the exercise of due diligence, be located;
• (b) has been transferred to a third party;
• (c) is located outside Canada;
• (d) has been substantially diminished in value or rendered worthless; or
• (e) has been commingled with other property that cannot be divided without difficulty.

Imprisonment in default of payment of fine

(4) Where a court orders an offender to pay a fine pursuant to subsection (3), the court shall

• (a) impose, in default of payment of that fine, a term of imprisonment
  • (i) not exceeding six months, where the amount of the fine does not exceed ten thousand dollars,
  • (ii) of not less than six months and not exceeding twelve months, where the amount of the fine exceeds ten thousand dollars but does not exceed twenty thousand dollars,
  • (iii) of not less than twelve months and not exceeding eighteen months, where the amount of the fine exceeds twenty thousand dollars but does not exceed fifty thousand dollars,
  • (iv) of not less than eighteen months and not exceeding two years, where the amount of the fine exceeds fifty thousand dollars but does not exceed one hundred thousand dollars,
  • (v) of not less than two years and not exceeding three years, where the amount of the fine exceeds one hundred thousand dollars but does not exceed two hundred and fifty thousand dollars,
  • (vi) of not less than three years and not exceeding five years, where the amount of the fine exceeds two hundred and fifty thousand dollars but does not exceed one million dollars, or
  • (vii) of not less than five years and not exceeding ten years, where the amount of the fine exceeds one million dollars; and
• (b) direct that the term of imprisonment imposed pursuant to paragraph (a) be served consecutively to any other term of imprisonment imposed on the offender or that the offender is then serving.

Fine option program not available to offender

(5) Section 736 does not apply to an offender against whom a fine is imposed pursuant to subsection (3).

734 (1) Subject to subsection (2), a court that convicts a person, other than an organization, of an offence may fine the offender by making an order under section 734.1

• (a) if the punishment for the offence does not include a minimum term of imprisonment, in addition to or in lieu of any other sanction that the court is authorized to impose; or
• (b) if the punishment for an offence includes a minimum term of imprisonment, in addition to any other sanction that the court is required or authorized to impose.

Offender’s ability to pay

(2) Except when the punishment for an offence includes a minimum fine or a fine is imposed in lieu of a forfeiture order, a court may fine an offender under this section only if the court is satisfied that the offender is able to pay the fine or discharge it under section 736.

Meaning of default of payment

(3) For the purposes of this section and sections 734.1 to 737, a person is in default of payment of a fine if the fine has not been paid in full by the time set out in the order made under section 734.1.

Imprisonment in default of payment

(4) Where an offender is fined under this section, a term of imprisonment, determined in accordance with subsection (5), shall be deemed to be imposed in default of payment of the fine.

Determination of term

(5) The term of imprisonment referred to in subsection (4) is the lesser of

• (a) the number of days that corresponds to a fraction, rounded down to the nearest whole number, of which
  • (i) the numerator is the unpaid amount of the fine plus the costs and charges of committing and conveying the defaulter to prison, calculated in accordance with regulations made under subsection (7), and
  • (ii) the denominator is equal to eight times the provincial minimum hourly wage, at the time of default, in the province in which the fine was imposed, and
• (b) the maximum term of imprisonment that the court could itself impose on conviction or, if the punishment for the offence does not include a term of imprisonment, five years in the case of an indictable offence or six months in the case of a summary conviction offence.

Moneys found on offender

(6) All or any part of a fine imposed under this section may be taken out of moneys 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 of or right to possession of those moneys is not disputed by claimants other than the offender, so directs.

Provincial regulations

(7) The lieutenant governor in council of a province may make regulations respecting the calculation of the costs and charges referred to in subparagraph (5)(a)(i) and in paragraph 734.8(1)(b).

Application to other law

(8) This section and sections 734.1 to 734.8 and 736 apply to a fine imposed under any Act of Parliament, except that subsections (4) and (5) do not apply if the term of imprisonment in default of payment of the fine provided for in that Act or regulation is

• (a) calculated by a different method; or
• (b) specified, either as a minimum or a maximum.