



COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Plange, 2019 ONCA 646

DATE: 20190807

DOCKET: C65230

Doherty, MacPherson and Benotto JJ.A.

BETWEEN

Her Majesty the Queen

Appellant

and

Kevin Ekow Plange

Respondent

David Quayat, for the appellant

Darren Sederoff, for the respondent

Heard: July 3, 2019

On appeal from the sentence
    imposed on March 20, 2018 by Justice Shaun S. Nakatsuru of the Superior Court
    of Justice.

Benotto J.A.:

[1]

The Crown appeals the sentence imposed following the respondents
    guilty plea to a $41 million fraud. The Crown submits that the sentencing judge
    erred: (i) in striking down the mandatory minimum; and (ii) by imposing a
    sentence that was demonstrably unfit.

overview

[2]

The respondent pleaded guilty to one charge of fraud over $5,000.
    The charge alleged:

THAT HE, the said KEVIN EKOW
    PLANGE, between August 13, 2013 and July 28, 2014, in the City of Toronto, in
    the Toronto Region, and elsewhere in the Province of Ontario, by deceit,
    falsehood or other fraudulent means unlawfully did defraud or attempt to
    defraud the Government of Canada of money in an amount greater than five
    thousand dollars ($5,000), by preparing and submitting false
RC366 E Direct
    Deposit Request  GST/HST, Payroll and/or Corporation Income Tax Forms
to
    the Canada Revenue Agency to change the direct deposit information of
    corporations, and as a result re-directed or attempted to re-direct Goods and
    Services Tax refunds and other payments properly payable to corporations, to
    bank accounts controlled by him, thereby committing an offence contrary to
    Section 380(1)(a) of the
Criminal Code of Canada
, as amended.

[3]

The guilty plea proceeded on an Agreed Statements of Facts. In the
    Agreed Facts, the respondent acknowledged that he had redirected GST refunds, properly
    payable by the Canada Revenue Agency (CRA) to various corporations, to bank
    accounts he controlled. In total, $41,831,073 were directed into his accounts
    by the CRA. The respondent managed to get only about $15,000 out of the
    accounts. Because the subject-matter of the fraud exceeded $1 million, the
    respondent was subject to the two-year mandatory minimum jail sentence provided
    for by s. 380(1.1).

[4]

The respondent argued that the mandatory minimum punishment was
    unconstitutional as applied to him and unconstitutional as applied in certain
    reasonable hypotheticals. The trial judge rejected the first submission but
    accepted the second. He declared the mandatory minimum unconstitutional and s.
    380(1.1) of no force and effect.

[5]

The trial judge went on to impose a sentence of 13 months, 18
    days (18 months reduced for credit for presentence custody and presentence bail
    conditions) to be followed by two years probation.

[6]

The Crown appealed. The Crown argued that the mandatory minimum
    did not constitute cruel and unusual punishment. The Crown further argued that
    regardless of the constitutionality of the mandatory minimum, the sentence
    imposed on the respondent was manifestly inadequate.

[7]

At the end of oral argument, the court advised the parties that the
    decision on the constitutional question would be reserved. However, the court
    indicated that the sentence imposed was manifestly inadequate. A sentence of
    three years should have been imposed. The court further advised the parties
    that it was not in the interests of justice to re-incarcerate the respondent at
    this time and that the court would not do so. Finally, the court advised the
    parties that written reasons would follow. These are the reasons.

the facts

[8]

Taxpayers, including corporations, who are entitled to refunds or
    rebates on various taxes can arrange to have the funds deposited directly into
    their bank accounts by the CRA. The user-friendly process established by the CRA
    requires only that the taxpayer file a form (Form RC366), directing that the
    funds be deposited into the specified bank account. The form is available on
    the CRA website.

[9]

Between August 2013 and July 2014, the respondent filed 28
    fraudulent RC366 Forms, purporting to change the direct deposit information for
    12 major corporations. He directed that the funds be deposited into his own
    account at the TD bank, or accounts at other banks he set up for the purpose of
    receiving the funds.

[10]

In completing the RC366 Forms, the respondent used information
    such as corporate addresses and business numbers. He also forged the signatures
    purporting to confirm the certification of a corporate officer or director
    authorizing the change in the bank account into which the funds were to be
    deposited.

[11]

The respondent filed his first group of fraudulent Forms in early
    August 2013. Those Forms directed the funds to his personal bank account at the
    TD Bank. Within a month, several deposits from the CRA, totalling almost $6
    million, had been made into his account. More deposits followed in October,
    totalling over $15 million. Another $15 million was deposited in December. The respondent
    could not, however, access these funds as the TD bank froze them.

[12]

In early 2014, the respondent filed another batch of fraudulent
    RC366 Forms. With this batch, however, he changed his process. By using different
    banks and multiple accounts he sought to circumvent the banks oversight. More
    than $5 million was deposited by the CRA. Despite ongoing and persistent
    efforts to free up funds, both by repeated calls to his banks and by many calls
    to the CRA seeking information that could facilitate access to the funds, the
    respondent only managed to get $15,290 out of the accounts. The scam ended in
    April 2014.

[13]

The respondent testified at the sentencing hearing. The trial
    judge also had the benefit of a lengthy and favourable presentence report. The
    respondent described his year-long effort to fraudulently divert funds from the
    CRA to his own bank accounts as an impulsive response to learning about a tax
    loophole. Despite this entirely self-serving and inaccurate description of his
    conduct, the trial judge accepted that the respondent was remorseful and had
    taken full responsibility for his actions.

[14]

In his evidence, the respondent attempted to explain his
    fraudulent conduct by referencing very large gambling debts he had accumulated.
    The respondent told the judge that he intended to pay off his gambling debt
    with the proceeds of his fraud. The trial judge found that the respondent did
    not commit the offence to pay off his debts, but, like most fraudsters, was
    motivated by greed.

ANALYSIS

[15]

I begin with a consideration of the mandatory minimum punishment
    for fraud over one million dollars and then turn to the fitness of the
    sentence.

Mandatory minimum
    punishment

[16]

Section 380(1.1) of the
Criminal Code
provides that a person convicted of fraud exceeding one million
    dollars is subject to a mandatory minimum punishment of two years.

[17]

The respondent submitted before the sentencing
    judge that this provision violated s. 12 of the
Canadian

Charter
    of Rights and Freedoms
because it constituted cruel and
    unusual punishment.

[18]

Section 12 of the
Charter
reads:

Everyone
    has the right not to be subjected to any cruel and unusual treatment or
    punishment.

[19]

The sentencing judge followed the two-step
    analytical approach to s. 12 claims:
R. v. Nur
,
    2015 SCC 15, [2015] 1 S.C.R. 773, at paras. 43-46;
R. v. Boudreault
, 2018 SCC 58, 429 D.L.R. (4th) 583, at para. 46; see also
R.
    v. J.L.M.
,
2017 BCCA 258,

353 C.C.C. (3d) 40 at para. 16;
R. v. Forcillo
, 2018 ONCA 402, 141 O.R. (3d) 752, at para. 124;
R. v.
    Morrison
, 2017 ONCA 582, 136 O.R. (3d) 545, at para. 117,
    revd on other grounds, 2019 SCC 15.

[20]

At the first step, the sentencing judge determined
    that the mandatory minimum sentence would not be grossly disproportionate for
    this offender. He then moved to the second stage to consider whether the
    sentence would be grossly disproportionate for other offenders. Here, he identified
    three reasonable hypotheticals:

·

A mortgage fraud involving a self-employed offender who
    overstates income or financial worth to obtain a $1 million mortgage. The
    overstatement is not significant. In the offenders eyes the financial
    statement was not dishonest because the self-employment income was based upon
    an aberrant year when income dipped from regular levels due to some unusual
    event such as illness. The sentencing judge found that to sentence this
    offender who had no prior criminal record to a penitentiary term would shock
    the conscience of the community.

·

A situation where a young college student impulsively submits one
    change of a corporations direct deposit information to the CRA. He does it for
    pure curiosity to see if it would work, or even out of altruism to uncover a
    defect in the system. The offender has no idea how much would be re-directed to
    his bank account if it does work. To his surprise, $1 million is deposited. He
    is shocked, remorseful, and immediately calls the bank to advise that this was
    a mistake. The sentencing judge found that a two-year sentence would be grossly
    disproportionate given the nature of the offence and the minimal moral
    blameworthiness of the offender.

·

A situation where the spouse of the accused, knowing what the
    accused was going to do, permitted the use of their joint bank account to
    receive any direct deposits from the CRA. As a party, the spouse too would be
    sentenced to a mandatory minimum sentence of two years.

[21]

The sentencing judge concluded that in these
    reasonable hypotheticals, the moral blameworthiness of the offender is significantly
    diminished, and, assuming the offender makes full restitution, no actual
    economic harm is caused. Consequently, it would outrage the standards of
    decency and shock the conscience of the community to impose a two-year
    sentence.

[22]

Having made this determination, the sentencing
    judge then determined that the impugned provision breached s. 12 of the
Charter
and was not saved by s. 1.

[23]

The appellant submits that the sentencing judge
    erred by considering these three hypotheticals. The first two do not amount to
    fraud and the third does not establish a reduced moral blameworthiness such
    that the mandatory minimum would shock the conscience of the community.

[24]

The offence of fraud requires the Crown to show
    that an accused has committed a dishonest act, by deceit, falsehood or other
    fraudulent means, and that a deprivation has been caused by the prohibited act.
    The deprivation may consist in actual loss or placing a victims pecuniary
    interests at risk:
R. v. Thé
roux,
[1993] 2 S.C.R. 5, at p. 20. The
mens rea
for
    fraud requires the specific intent to deceive, lie, or commit some other
    fraudulent act.

[25]

The
mens rea
for fraud excludes from its ambit negligent misrepresentation, misstatement or
    improvident business conduct. An act of deceit made carelessly or as a prank
    when the person has no knowledge that the property of others would be put at
    risk is not fraud. Fraud is a deliberately practiced fraudulent act which, in
    the knowledge of the accused, actually put the property of others at risk:
Thé
roux,
at p. 26.

[26]

The first hypothetical invoked by the sentencing
    judge involves a self-employed individual who fudges income to correct for an
    aberrant year so as to qualify for a million-dollar mortgage. This hypothetical
    does not amount to fraud and is not reasonable. Fraud involves intentional
    dishonesty. In constructing the hypothetical, the trial judge assumes the
    putative offender commits fraud, but goes on to state that the putative offender
    does not see the financial statement as being dishonest. This shift in the
    hypothetical removes the example from the ambit of criminal fraud. The accused
    in this hypothetical intended no dishonesty.

[27]

The second hypothetical is also problematic. The
    young college student who submits the same forms as the respondent out of
    curiosity or altruism has not intended to deceive or put the property of others
    at risk. This hypothetical lacks the
mens rea
to establish fraud. It is also, in my view, far-fetched.

[28]

The hypothetical involving the spouse of an
    accused such as the respondent who allows the accused to utilize their bank
    account to perpetrate the fraud is unconvincing. If, as the hypothetical
    suggests, the spouse has full knowledge of the fraud and agrees to provide a
    bank account to facilitate the scheme, there is no principled reason why the
    mandatory minimum should not apply. Party participation is not a reason to
    lower a sentence from that of the principal.

[29]

In my view, the judges use of these
    hypotheticals to declare the section unconstitutional was in error. Therefore, the
    mandatory minimum punishment  on this basis  cannot be struck down and the
    appeal must be allowed. The question then becomes whether this court should create
    a hypothetical of its own in order to declare the section unconstitutional. This
    is where I part company with my colleague Doherty J.A. He agrees that the
    hypotheticals used by the sentencing judge do not lead to a declaration of
    unconstitutionality. However, he would construct a different hypothetical. I
    would not.

[30]

I do not agree that it is this courts function
    in this case to construct a hypothetical in order to declare the mandatory
    minimum unconstitutional. I say this for three related reasons: (i) the onus is
    on the party challenging the validity of the legislation to establish the
    hypothetical; (ii) the parties, particularly the Crown, should have the
    opportunity to fully address the hypothetical; and (iii) there is no prejudice
    because the issue remains to be determined on a proper record in the future.

Onus

[31]

The onus is on the party challenging the validity of a
    legislative provision to establish a reasonable hypothetical. This was
    confirmed by the Supreme Court of Canada in
R. v. Goltz
,
    [1991] 3 S.C.R. 485, at p. 520:

On the second aspect of the s. 12
    analysis, the onus to demonstrate a reasonable hypothetical circumstance in
    which enforcement of the statute would violate s. 12 for imposing excessive or
    grossly disproportionate punishment remains with the party challenging the
    provision's validity. In the instant appeal, that onus was not discharged. Consequently,
    the challenge based on the second and hypothetical limb of the s. 12
    inquiry must also fail.

[32]

On this basis, the challenge with respect to the
    constitutionality of s. 380(1.1) must also fail.

[33]

By placing the onus on the party seeking to challenge a mandatory
    minimum provision, the law ensures that the Crown and the court have an
    opportunity to fully examine the reasonableness of the hypothetical.

[34]

I turn to my second reason: the importance of submissions.

Submissions required

[35]

When a legislative provision is challenged on
    the basis of its effect on a reasonable hypothetical offender, the parties, in
    particular the Attorney General, should have an opportunity to fully respond. As
    my colleague says, the hypothetical he relies on was put to the parties in oral
    submissions. However, the brief discussion did not relate to the reasonableness
    of the hypothetical but rather to the fact that the conduct would be captured
    by the mandatory minimum. The facts underlying the hypothetical were not
    vetted. This is significant since I  for one  am not convinced that the
    hypothetical discloses opportunistic or spontaneous conduct on the part of
    the hypothetical offender. Nor do I agree that it lacked sophistication. Quite
    the contrary. I do not accept, without submissions, that one could come
    across direct deposit instructions on the CRA website that could be used for a
    diversion of funds belonging to someone else. The fraud would involve multiple
    rather sophisticated and dishonest steps. A suitable corporation would have to
    be identified, the business number fraudulently obtained; a corporate search
    would be necessary to determine the proper name of the corporation and the
    names of the officers to be forged; the Form itself would have to be completed
    and filed. I raise these matters, not to conclude that the hypothetical is not
    reasonable, but rather to demonstrate why submissions would be necessary in
    order for this court to conclude that a two year prison sentence for this hypothetical
    offender would be grossly disproportionate.

[36]

I agree with my colleague that to test the law,
Nur
(para. 63) requires the court to look at the offender and others.
    The issue here is not whether the court can consider reasonable hypotheticals;
    clearly it can. The issue is whether, on the facts of this case, this court
    should construct a hypothetical not considered by the court below, and not
    fully argued, in order to declare a legislative provision unconstitutional.

No impediment to a future consideration

[37]

Finally, I note that the issue of whether s.
    380(1.1) breaches s. 12 of the
Charter
may be
    considered in a different context. As the Supreme Court said in
Nur,
at para. 71:

A courts conclusion based on its
    review of the provisions reasonably foreseeable applications does not
    foreclose consideration in future of different reasonable applications. [Citations
    omitted.]

[38]

Consequently, I would allow the appeal of the constitutional ruling
    and set aside the trial judges declaration that s. 380(1.1) of the
Criminal
    Code
is of no force and effect.

Fitness of sentence

[39]

The sentence imposed by the trial judge was
    demonstrably unfit when compared to other large-scale frauds.

[40]

In
R. v. Koval
,
    [2001] O.J. No 1205 (S. C.), Watt J. (as he then was) found that large-scale
    commercial frauds attract sentences of 5-8 years where large sums of money are
    put at risk. In
R. v. Watts
, 2016 ONSC 4843, [2018]
    D.T.C. 5024, the court set a sentencing range of 4-8 years in a case involving
    a large-scale fraud where $10 million was put at risk and the accused obtained
    $150,000 from the fraud. The fraudulent scheme involved the filing of false tax
    documents. Other large-scale frauds implicating loss or risk of approximately
    $2-40 million dollars have attracted sentences of 3.5-8 years. More recently,
    this court confirmed that in cases of large-scale fraud the range is generally 3-5
    years:
R. v. Davatgar-Jafarpour,
2019 ONCA 353,
    at para 34.

[41]

The sentencing judge also erred by
    characterizing the fraud in a manner that was not supported by the evidence,
    and mitigating the respondents sentence on that basis. He reasoned that
    because the respondents fraudulent scheme was unique and unsophisticated,
    this mitigated in favour of a lower sentence being imposed. The unique aspects
    of the fraud, according to the sentencing judge, are that it was accomplished
    simply by downloading a form available from the internet and filing it with the
    Canada Revenue Agency.

[42]

This characterization is incomplete and
    understates the sustained effort made by the respondent to execute the fraud.
    The form itself reveals that there was significant research involved in
    completing it. It ignores the multiple attempts he made to access the money and
    the attempt to reconfigure his scheme to avoid detection. The sentencing judge
    understated the moral blameworthiness of the respondent.

[43]

While the sentencing judge noted the importance
    of general and specific deterrence, the substance of his approach betrays the
    reference to deterrence. Instead of focusing on the efforts made by the
    respondent to advance the fraud, he focused on the lack of sophistication and
    the inevitable detection of the fraud.

[44]

For these reasons, a sentence of 18 months was
    demonstrably unfit. I conclude that a fit sentence is three years.

[45]

The respondent has served the sentence
    previously imposed so we turn to the issue of re-incarceration.

[46]

This court has stated that when a fit sentence
    is determined to be higher than that already served, denunciation and general
    deterrence may be achieved without re-incarceration: see
R. v.
    Dufour,
2015 ONCA 426, 326 C.C.C. (3d) 52.

[47]

The respondents rehabilitation demonstrates
    that this case does not require re-incarceration to uphold the sentencing
    principles. For this reason, as stated at the outset of these reasons, the
    court advised the parties that it would stay the remainder of the sentence.

CONCLUSION

[48]

I would allow the appeal, impose
a
    sentence of three years with the proviso that it is not in the interests of
    justice to re-incarcerate the respondent at this time and I would stay the
    remainder of the sentence.

M.L. Benotto J.A.

I agree J.C.
    MacPherson J.A.

Doherty J.A. (Concurring):

[49]

I have read the reasons of my
    colleague, Benotto J.A. I agree entirely with her analysis of the fitness of
    the sentence (paras. 38-46) and her proposed disposition of the appeal (para.47).
    I would add only that, absent the impressive array of mitigating factors which
    included a guilty plea, the small loss suffered by the CRA, full restitution,
    the respondents youth, and his first offender status, a significantly longer
    sentence would have been necessary.

[50]

I part company with my colleague,
    however, on the constitutional question. In my view, this court should address
    the merits of the constitutional argument. I agree with the trial judge that
    the two-year mandatory minimum in s. 380(1.1) does amount to cruel and unusual
    punishment, and that the section should be declared of no force or effect.

The Section 12 Analysis

[51]

The Supreme Court has repeatedly stressed that the requirement
    that the sentence be grossly disproportionate sets a high constitutional bar.
    Sentences that are merely excessive or disproportionate so as to warrant
    appellate intervention on a sentence appeal do not necessarily rise to the
    level of cruel and unusual punishment:
Nur
, at para. 39;
R. v.
    Lloyd
, 2016 SCC 13, [2016] 1 S.C.R. 130, at para. 24;
R. v. Morrisey
,
    2000 SCC 39, [2000] 2 S.C.R. 90, at para. 26;
R. v. Serov
, 2017 BCCA
    456, at para. 24. For example, the trial judge correctly acknowledged that an
    18-month sentence, the sentence he regarded as fit for the respondent, would
    not render the two-year mandatory minimum sentence grossly disproportionate as
    applied to the respondent.

[52]

In addition to reaffirming the two-step approach to the analysis
    of a s. 12 claim,
Nur
reiterates that the analysis must be applied first
    to the offender and, if the mandatory minimum as applied to the offender does
    not offend s. 12, to other putative offenders, referred to as reasonable
    hypotheticals, who might reasonably be caught by the provision:
Nur
,
    at paras. 47-65;
Forcillo
, at para. 125.

[53]

Constitutional review that extends beyond the
    circumstances of the specific case and the specific offender is not unique to
    s. 12. A person who is subject to a law can challenge the constitutionality of
    that law, even if the law does not infringe that persons constitutional rights:
    see
R. v. Big M Drug Mart
, [1985]
    1 S.C.R. 295, at p. 314. McLachlin C.J.,
in
Nu
r
, offers an eloquent explanation for the need to go beyond the circumstances
    of the individual case when assessing the constitutionality of a law:

[63] Not only is looking at the laws impact on persons whom it
    is reasonably foreseeable the law may catch workable  it is essential to
    effective constitutional review. Refusing to consider reasonably foreseeable
    impacts of an impugned law would dramatically curtail the reach of the
Charter
and the ability of the courts to discharge their duty to scrutinize the
    constitutionality of legislation and maintain the integrity of the
    constitutional order. The protection of individuals rights demands
    constitutional review that looks not only to the situation of the offender
    before the court, but beyond that to the reasonably foreseeable reach of the
    law.
Testing the law against reasonably
    foreseeable applications will prevent people from suffering cruel and unusual
    punishment in the interim until the mandatory minimum is found to be
    unconstitutional in a particular case.

[64] Refusing to consider an
    impugned laws impact on third parties would also undermine the prospect of
    bringing certainty to the constitutionality of legislation, condemning
    constitutional jurisprudence to a wilderness of single instances.
Citizens, the police and government are entitled  and
    indeed obliged  to know what the criminal law is and whether it is
    constitutional. Looking at whether the mandatory minimum has an
    unconstitutional impact on others avoids the chilling effect of
    unconstitutional laws remaining on the statute books.
[Emphasis
    added.]

[54]

With respect to the contrary view, I do not accept an approach that
    limits a s. 12 claim to the circumstances of the specific offender and any reasonable
    hypotheticals advanced by the parties, or considered by the trial judge. While
    procedural fairness demands that the parties have a full opportunity to address
    any reasonable hypothetical on which the outcome of the constitutional
    challenge may turn, this court is obliged to consider any hypothetical it views
    as a reasonably foreseeable application of the mandatory minimum. The court
    cannot decline to consider reasonable hypotheticals on the basis that those
    same hypotheticals can be raised and considered in some future proceeding.

[55]

The s. 12 analysis in this case focuses on the application of the
    mandatory minimum to reasonable hypotheticals. The respondent does not argue
    that a sentence of two years would be grossly disproportionate in the
    circumstances of his case.

[56]

I will return to the reasonable hypothetical inquiry later in my
    reasons. Before doing so, however, it is necessary to address the elements of
    the crime of fraud and the relevance of the value of the subject-matter of the
    fraud to the gravity of the offence and the moral culpability of the offender.

The Elements of Fraud

[57]

Fraud, as described in s. 380 of the
Criminal Code
,
    consists of voluntarily performing an act that is in the nature of a deceit,
    falsehood or other fraudulent means. The prohibited act must result in actual
    pecuniary loss to the victim, or it must place the victims pecuniary interests
    at risk:
R. v. Thé
roux
, [1993] 2 S.C.R. 5, at p. 20. The
actus reus
of the crime of fraud is captured by the phrase dishonest
    detriment.

[58]

The fault or
mens rea
component of the crime of fraud
    has two parts. The Crown must prove subjective knowledge of the prohibited act.
    Thus, in cases like this one, involving an allegation of a false representation,
    the Crown must prove that the respondent knew that the representation in the
    Forms to the effect that the identified corporations were redirecting the
    deposits to a different account was false. In addition to knowledge of the
    falsity of the representation, the Crown had to prove that the respondent knew
    that in doing the prohibited act he could cause actual pecuniary loss to the CRA,
    or could put the CRAs pecuniary interests at risk:
Thé
roux
, at p. 26
. In other words, the Crown had
    to prove that the respondent knew that, by falsely redirecting the refunds into
    bank accounts he controlled, the CRA could lose those funds or, at a minimum,
    be put at risk of losing those funds. The Crown did not have to prove an
    intention to cause loss or risk of loss. It was sufficient if the Crown proved
    that the respondent was reckless as to that consequence:
Thé
roux
, at pp. 25-26.

[59]

There is no doubt that the crime of fraud, first introduced into
    the
Criminal Code
in 1954 (S.C. 1953-54, c. 51, s. 323), captures
    a very broad range of activity and is designed to encompass the entire panoply
    of dishonest commercial dealings:
Thé
roux
, at p. 24. Fraud,
    as defined in s. 380, creates a broad honesty-based criminal offence freed from
    the limitations and qualifications that had grown up over centuries around common
    law-based property crimes such as obtaining property by false pretenses. The
    courts have given the crime of fraud the very broad reading intended by the
    language of the section: see e.g.
R. v. Olan
, [1978] 2 S.C.R. 1175; see
    also J. Douglas Ewart,
Criminal Fraud
(Toronto: Carswell, 1986), at
    pp. 5-10.

[60]

The long reach of the crime of fraud is important to the s. 12
    analysis. Mandatory minimums that apply to offences that can be committed in
    many ways, in many different circumstances, and by a wide range of people are
    constitutionally vulnerable under s. 12 because, by virtue of their broad
    scope, they run the very real risk of capturing offenders for whom the
    mandatory minimum will be grossly disproportionate punishment:
Lloyd
,
    at para. 3;
Forcillo
, at paras. 126-27;
Morrison
, at
    paras. 117-19.

[61]

If the two-year mandatory minimum applied to all crimes of fraud
    over $5,000, it could not survive s. 12 scrutiny. First offenders who plead
    guilty to fraud over $5,000 quite often do not go to jail at all, much less to
    the penitentiary for two years. It takes no imagination to envision reasonably
    foreseeable circumstances in which a sentence of two years for fraud over
    $5,000 would constitute a grossly disproportionate sentence. One need only read
    the reported cases.

The Reach of the Mandatory Minimum

[62]

The mandatory minimum in issue does not apply to all frauds over
    $5,000. Subsection 380(1.1) provides that when a person is convicted of fraud,
    the court shall impose a minimum punishment of imprisonment for a term of two
    years if the total value of the subject-matter of the offences exceeds one
    million dollars. The value of the subject-matter of the offences refers to
    the amount of the loss or risk of loss suffered by the victim.

[63]

The question becomes  does limiting the mandatory minimum to
    frauds in which the loss or risk of loss is over $1 million adequately
    distinguish those frauds for which two-year sentences would not be grossly
    disproportionate from those frauds for which two years would be grossly
    disproportionate? Put somewhat differently, is the fact that the value of the subject-matter
    of the fraud exceeds $1 million a sufficiently aggravating factor on sentence
    that it overrides mitigating factors that could arise in reasonably foreseeable
    situations, to the extent that a two-year sentence in reasonably foreseeable
    cases of fraud over $1 million will never be grossly disproportionate.

[64]

In examining proportionality, one looks to the relationship
    between the mandatory minimum and the penalty that would be imposed using the
    generally applicable principles of sentencing. Those principles focus on the gravity
    of the offence, the harm caused by the offence, and the blameworthiness of the
    offenders conduct. If the sentence commanded by the mandatory minimum is
    grossly disproportionate to the sentence that would be imposed using the
    generally applicable principles of sentencing, the mandatory minimum violates
    s. 12:
Nur
, at para. 44.

[65]

The value of the subject-matter of the fraud has always been an
    important consideration in determining the gravity of the crime of fraud. Not
    only does s. 380 distinguish between the two levels of fraud based on the value
    of the subject-matter of the fraud (above or below $5,000), s. 380.1(1)(a)
    specifically provides that the magnitude of a fraud must be treated as an aggravating
    circumstance on sentence. The amount of the loss or risk of loss speaks
    directly to the magnitude of the fraud. By tying the mandatory minimum penalty to
    frauds that involve a very substantial loss or risk of loss, Parliament has connected
    the mandatory minimum to a factor that clearly identifies potentially serious
    frauds.

[66]

The value of the loss or risk of loss can also reflect the harm
    caused by the offence. In cases in which the victim suffers an actual loss,
    there is a direct and strong correlation between the value of the loss and the
    harm caused. The greater the loss, the greater the harm. That connection is
    weaker when there is no actual loss, but rather a risk of loss. The level of
    risk sufficient to satisfy the detriment component of the
actus reus
of fraud runs along a continuum. Sometimes, the risk of actual pecuniary loss
    may be small: see e.g.
R. v. Knowles
(1979), 51 C.C.C. (2d) 237 (Ont.
    C.A.), at p. 241; see also Ewart, at pp. 121-33. In some reasonably foreseeable
    circumstances, the amount of the fraud will be over $1 million, but the actual
    risk of loss will be low and there will be no actual loss. In those cases, the
    harm flowing from the fraud will be minimal.

[67]

The third factor relevant to proportionality in sentencing, the
    blameworthiness of the offender, may or may not have some correlation to the
    value of the subject-matter of the fraud. In most frauds, the offender will know,
    at least in general terms, the amount of the victims loss or risk of loss. The
    offenders gain is often a reflection of the victims loss. In those typical cases,
    the offenders understanding that the subject-matter of the fraud involves a
    large amount of money increases the blameworthiness of the conduct.

[68]

There are, however, situations in which the value of the fraud
    does not contribute to the blameworthiness of the offenders conduct. Two
    points should be made. First, fraud does not require an intention to cause loss
    or risk of loss to anyone. Recklessness will suffice. Some fraudsters firmly
    believe that everyone will be better off financially after the fraud is
    perpetrated.

[69]

Second, and this is particularly significant in assessing
    blameworthiness, the amount of the fraud plays no role in determining liability
    for the offence. The Crown is not required to prove that an accused was aware
    of, or even turned her mind to, the amount of the fraud or the amount put at
    risk by the fraud. Consequently, the value of the subject-matter of the fraud
    will, in some cases, say nothing about the blameworthiness of the offenders
    conduct. Indeed, on the agreed facts of this case, when the respondent filed
    the first batch of false RC366 Forms, he did not turn his mind to the amount of
    any deposits that might be redirected into his account.

The Reasonable Hypothetical

[70]

Nur
, at para. 62, describes reasonable hypotheticals as
    grounded in judicial experience and common sense. Reasonable hypotheticals do
    not include far-fetched examples that marshal every conceivable mitigating
    factor in a combination that will never realistically arise in the real world.
    Reasonable hypotheticals do, however, include, not only circumstances that are
    likely to arise in the general application of the law, but also situations that
    may reasonably arise:
Nur
, at
    para. 68. Reasonable hypotheticals include personal characteristics of an
    offender such as age, or the absence of a criminal record, but again not
    constellations of mitigating personal circumstances that defy human experience:
Nur
, at para. 75.


[71]

The trial judge referred to three hypotheticals. My colleague has
    examined each of them. I agree with much of what she says. The first two
    hypotheticals are cluttered with details that tend to render the criminality of
    the conduct questionable. Reasonable hypotheticals must present facts that
    clearly establish liability for the offence. I also agree with my colleague
    that on the limited facts offered by the trial judge in the third hypothetical,
    there is no basis to conclude that the mandatory minimum would be grossly
    disproportionate.

[72]

I test the constitutionality of the mandatory minimum against a reasonable
    hypothetical that is a variation of the trial judges second hypothetical. This
    variation is very close to the agreed facts in this case, as they apply to the
    first batch of fraudulent RC366 Forms filed by the respondent in August 2013.
    This hypothetical was put to counsel in the course of oral argument.

[73]

Assume A comes across the CRA website and the instructions
    about direct-deposit banking. Although it seems too easy to be true, A
    decides to try to make some quick money by sending in one fraudulent RC366
    Form, directing payment of certain tax rebates owed to a corporation into his
    account. He picks a company at random and sends in a fraudulent Form. A never
    turns his mind to the amount of any payment he might receive from the CRA. In
    fact, he assumes that the CRA must have some way of checking the information in
    the Forms and he doubts that his scheme will be successful.

[74]

A few days later, A is shocked to see that the CRA has
    deposited $3 million into his bank account. At the same time, he learns that
    his bank has frozen the account pending inquiries.

[75]

A quickly assesses his situation. He realizes, given the very
    large amount that has been deposited into his account, that he is potentially
    in very serious trouble. A also appreciates that, because of the actions of his
    bank, he will not be able to get any of the money out of the account, and the
    CRA will learn of his deception very soon. A decides to make the best of a
    bad situation. He goes to his bank and tells them that the money does not
    belong in his account and asks that they return it to the CRA. A also
    notifies the CRA. The police become involved. A pleads guilty to fraud and cooperates
    fully. He is a young first offender with strong community support and solid
    prospects.

[76]

On the facts of the hypothetical, there is no question that A is
    guilty of defrauding the CRA. He knowingly made false representations, redirecting
    public funds from taxpayers to whom they were owed, to his account. He knew he
    was creating the risk that the CRA would suffer a pecuniary loss, even though
    he never turned his mind to the amount of that potential loss, and certainly
    did not anticipate anything like the amount that was deposited into his account.
    The CRA suffered no loss and, because of banking policies, any risk of
    pecuniary loss as a consequence of As actions was minimal.

[77]

In terms of As blameworthiness, the conduct was deliberate and
    dishonest under any definition. However, it was, to a large extent, spontaneous
    and opportunistic. This was not a carefully, planned out, or sophisticated
    scheme. It was in fact bound to fail and when A realized that inevitability
    and the amount of money involved, he moved quickly to acknowledge his wrong and
    take responsibility for it.

[78]

In my view, a trial judge sentencing A might reasonably
    conclude that, despite the many mitigating factors, the value of the
    subject-matter of the fraud, combined with the public nature of the funds,
    required a denunciatory sentence that included a jail sentence in the range of
    six to twelve months. Other sentencing judges might conclude that a jail term
    was unnecessary. However, a sentence of two years in the penitentiary is far
    beyond what is reasonably necessary to deliver that denunciatory message. A sentence
    of two years also grossly overstates the blameworthiness of As conduct and
    the loss caused by his conduct. A jail sentence which is at least double the
    sentence at the outer limits of proportionality is properly characterized as
    grossly disproportionate.

[79]

Mandatory minimum sentences alter the sentencing dynamic. That
    dynamic generally relies on sentencing judges to balance all relevant factors
    and impose a sentence within the very broad range set by Parliament that is tailored
    to the specific circumstances of the offence and the offender. Subject to
    constitutional restraints, Parliament is entitled to dictate sentencing policy
    by, for example, imposing mandatory minimums that favour general deterrence and
    denunciation over the individualization of the sentence. Section 12 of the
Charter
,
    however, limits Parliaments authority to sacrifice other sentencing principles
    in the name of deterrence and denunciation. Deterrence and denunciation cannot
    be achieved by the imposition of grossly disproportionate sentences. That
    strategy is constitutionally unacceptable:
Nur
, at paras. 44-45.

[80]

In most cases, and this is certainly one of them, frauds involving
    over $1 million will attract sentences of two years or more. However, in some
    reasonably foreseeable circumstances, and I outlined one above, the two-year mandatory
    minimum will be grossly disproportionate. It follows that the mandatory minimum
    of two years set down in s. 380(1.1) is unconstitutional and should be declared
    of no force or effect.

conclusion

[81]

Like my colleague, I think a sentence of three years should have
    been imposed. However, having regard to all of the circumstances, and in
    particular, the fact that the Crown is not pressing for re-incarceration, I agree
    with my colleague that re-incarceration is not in the public interest.

Doherty J.A.

Released: August 7, 2019

D.D.


