



COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Khatchatourov, 2014 ONCA 464

DATE: 20140616

DOCKET: C55596

Hoy A.C.J.O., MacPherson and Blair JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

Andrei Khatchatourov and Natalya Reznik

Appellants

Gordon S. Campbell, for the appellants

Melissa Adams, for the respondent

Heard: May 1, 2014

On appeal from the convictions entered on December 9,
    2011 by Justice Alfred J. OMarra of the Superior Court of Justice, sitting with
    a jury, and from the sentences imposed on May 25, 2012, with reasons reported
    at 2012 ONSC 3511.

MacPherson
    J.A.:


A.

INTRODUCTION

[1]

Following a 37-day jury trial, the appellants Andrei Khatchatourov and
    Natalya Reznik were found guilty of multiple mortgage financing frauds.  The
    frauds involved the purchase and sale of 11 residential properties and 27
    mortgages arranged between April 2000 and July 2007.  The frauds consisted
    largely of duping and manipulating recent immigrants from Russia and the
    Ukraine and using their identities to obtain mortgage financing and to take
    title to properties, usually in order to obtain mortgage advances that
    financial institutions would not otherwise have made.

[2]

The trial judge imposed a sentence of four years' imprisonment on both
    accused, fines in lieu of forfeiture of $423,580.41 (Mr. Khatchatourov) and
    $71,954.63 (Ms. Reznik), and a $495,535.04 restitution order (jointly and
    severally).

[3]

The appellants appeal the convictions and sentences.

B.

FACTS

(1)

The parties and events

[4]

Mr. Khatchatourov, an immigrant from Russia, operated a company called
    Canada Suites that was in the business of renting out condominium apartments
    for short-term accommodation.

[5]

Ms. Reznik, an immigrant from Belarus, acted as a paralegal to assist
    members of the Russian and Ukrainian communities with immigration matters in
    the Toronto area.

[6]

Ms. Reznik made use of her contacts with recent immigrants to encourage
    a number of them to participate in Mr. Khatchatourovs business of buying, renting
    and selling condominium apartments.  Some were led to believe that they were
    investing in condominium units that Mr. Khatchatourov would rent out on their
    behalf.  Others were told that they could improve their credit ratings and more
    quickly purchase property themselves by co-signing as guarantors to help
    someone else purchase property.  Many, after signing documents they did not
    understand or had interpreted to them by the appellants, ended up having both
    title to the property and mortgages taken unknowingly in their names.  Some
    simply provided identification documents and later found to their surprise that
    title to properties and mortgages had been registered in their names when
    institutional lenders began seeking past due mortgage payments.

[7]

The frauds were committed by a variety of means.  The core of the frauds
    was the appellants manipulation of recent Russian and Ukrainian immigrants. 
    The appellants used the immigrants identities to obtain mortgage financing and
    to take title to properties.  The properties were then sold at inflated values
    to other straw purchasers whose identities and false employment and income
    information was used to obtain mortgage financing. The mortgage proceeds were
    used, in part, to pay the profits from the artificial re-sale.  The profits
    were disbursed to the appellants from the lawyers trust accounts upon
    completion of the fraudulent deals. The mortgages were not paid and when they
    went into default the financial institutions had to undertake power of sale
    proceedings.  The financial institutions suffered losses when the properties
    sold at fair market value.

[8]

In the process of obtaining mortgage financing, the appellants falsified
    employment letters, income statements, bank account statements, and even
    citizenship documents in the names of the nominal purchasers to facilitate the
    frauds.  They also falsified powers of attorney to execute documents in the
    names of the nominees and to give directions concerning the distribution of
    proceeds from the purchase and sale transactions.

[9]

While the appellants misused the personal information of several people
    who trusted them, they took particular advantage of the Graniks and the Vinniks.
    These couples were used directly or indirectly in five of the ten counts of
    fraud with which the appellants were jointly charged. Ms. Reznik gained their
    confidence and then introduced them to Mr. Khatchatourov.

[10]

The
    identities of Kostytyn Granik and his wife Yuliana were used by the appellants
    in committing the frauds on three of the counts. The Graniks immigrated to
    Canada from the Ukraine in December 1999. Ms. Reznik assisted them by opening
    bank accounts in their names prior to their arrival to show that they had the
    appropriate funds to immigrate. She helped them rent their first apartment and obtain
    the necessary documentation, such as health cards and social insurance numbers.
    A joint bank account was opened in the name of Mr. Granik and Ms. Reznik. The
    Graniks

came to

know Ms. Reznik well and considered her a friend.
    Mr. Granik provided a legitimate power of attorney to Ms. Reznik to permit her
    to deal with banking and other financial matters in his absence as he and his
    wife travelled periodically back to Ukraine.

[11]

The
    Graniks met Mr. Khatchatourov through Ms. Reznik. Mr. Khatchatourov suggested
    that it would be a good business opportunity for them to become involved in the
    purchase of condominiums that his company would rent and from the rents pay
    mortgage and other fees. The Graniks would receive the rest, less 20%
    management fee to Canada Suites. They agreed, and purchased 410 - 10 Yonge
    Street in 2000.

[12]

The
    arrangement was in place for approximately two years. Then Mr. Khatchatourov
    told Mr. Granik that because the condominium board had decided to end
    short-term rentals in the building, the property should be sold. He would find
    the buyer and make all the arrangements. However, as described in more detail
    by the trial judge in his reasons for sentence, the appellants resold the
    property twice without Mr. Graniks knowledge, returned his deposit, and kept
    the profits.  In selling the property, the appellants misused a power of
    attorney that Mr. Granik had given to Ms. Reznick for another purpose.  They
    used the identities of other Russian immigrants as the ostensible participants
    in these fraudulent transactions, and defaulted on the mortgage so that the
    property had to be sold under power of sale at a loss.

[13]

The
    Graniks invested in a second property through Mr. Khatchatourov. The appellants
    submitted false mortgage documentation for the purchase of 1009  55 Bloor
    Street East, alleging that Mr. Granik was an employee of Ms. Rezniks. The
    property was subsequently resold in 2004, again using false documents without
    the knowledge of Mr. Granik. The appellants tried to sell it once more, using
    one of Mr. Khatchatourovs clients as the buyer, but the mortgage application
    was rightly suspected to be fraudulent and was not approved. TD Canada Trust
    ultimately sold the property at a loss under power of sale.

[14]

The
    Graniks name was used entirely without their knowledge in a third set of
    transactions. The appellants purchased 338 Harvie in Yuliana Graniks name,
    then sold it again to another recent immigrant to whom Ms. Reznik had promised
    help, Mr. Ermakov. The appellants used Mr. Ermakovs personal information to
    obtain mortgage financing and purchase the property in his name, using a false
    power of attorney in favour of Mr, Khatchatourov. It was sold for a third time
    using false documentation in a transaction in which Mr. Khatchatourov was both
    vendor and purchaser and, on closing, a cheque was issued to him for $58,205.42
    in trust.

[15]

The
    Vinniks were also brought into the fraudulent scheme through Ms. Reznik, and
    two counts relate to them. Ivan Vinnik and his wife ran a coffee house in
    Toronto. They met Ms. Reznik because she had helped Mr. Vinniks parents as a
    paralegal. The Vinniks approached Ms. Reznik when they had financial
    difficulties and asked her to help them. She persuaded them to sell their home
    to her temporarily. She told them that the proceeds from the sale could be
    invested in downtown condominiums managed by Canada Suites and then sold at a
    higher price, allowing the profits to be put back into their coffee shop
    business. She said she would later sell the house back to them, but she never
    did and they lost their home.

[16]

The
    appellants then used the Vinniks identities in two further fraudulent
    transactions. They paid the profits out to themselves and the lenders had to
    sell the two properties at a loss when the mortgages went into default.

[17]

The
    appellants profits from their fraudulent schemes, as evidenced by cheques they
    received flowing from various transactions, were $423,580.41 (Khatchatourov)
    and $71,954.63 (Reznik).  The financial institutions involved in the
    transactions lost $1,167,869.95, which amount was ultimately reimbursed by the
    Canada Mortgage and Housing Corporation (CMHC).

(2)

The trial

[18]

The
    appellants were charged jointly on 10 counts of fraud and Mr. Khatchatourov was
    charged alone on an 11
th
count.  The jury found the appellants
    guilty on all counts.

(3)

The sentence

[19]

The
    trial judge delivered comprehensive reasons for sentence (139 paragraphs).  He
    observed (at para. 103) that [d]efence counsel did not seek to differentiate
    between the offenders as to the length of incarceration that would be
    appropriate and I see no basis to do so either in this case.

[20]

The
    trial judge imposed a custodial sentence of four years imprisonment on both
    accused.  He imposed fines in lieu of forfeiture pursuant to s. 462.37 of the
Criminal
    Code
of $423,580.41 for Mr. Khatchatourov and $71,954.63 for Ms. Reznik. 
    According to the trial judge, these were the amounts received by each, as
    reflected by the cheques issued in their interest in the various transactions.

[21]

The
    trial judge also made a restitution order pursuant to s. 738 of the
Criminal
    Code
against both accused jointly and severally in favour of the CMHC, which
    had insured the financial institutions, in the amount of $495,534.04. The trial
    judge found (at para. 131) that this was the total amount disbursed to them,
    as reflected by the cheques issued in the property transactions.

C.

ISSUES

[22]

The
    appellants advance six grounds of appeal, three relating to conviction and
    three relating to sentence.  I would frame the grounds of appeal as six
    questions:

(1)

Did the trial judge err by
    charging the jury on co-conspirators in the absence of allegations or evidence
    of conspiracy and did he err in the contents of this portion of his charge?

(2)

Did the trial judge err in
    his jury charge by itemizing certain evidence as if it were proven fact rather
    than evidence to be weighed?

(3)

Did the trial judge err by
    not providing sufficient mid-trial or final instructions to the jury in
    response to Crown counsels comments disparaging the defence?

(4)

Did the trial judge impose
    custodial sentences that were harsh and excessive and outside the range for similar
    offences?

(5)

Did the trial judge err by
    imposing fines in lieu of forfeiture?

(6)

Did the trial judge err in
    his treatment of the appellants ability to pay in the context of the fine and
    restitution orders he made?
[1]

D.

ANALYSIS

(1)

Jury charge on co-conspirators

[23]

In
    this case, the only charges against the appellants were offences of fraud;
    there were no separate conspiracy charges.  The appellants contend that the
    trial judge erred in instructing the jury on co-conspirators in the absence of
    conspiracy charges being laid against them.

[24]

I
    do not accept this argument.  In my view, the trial judges decision to charge
    the jury on the issue of co-conspirators was consistent with the leading
    authorities at the time, especially
R. v. Carter
, [1982] 1 S.C.R. 938,
    and
R. v. Bogiatzis
, 2010 ONCA 902.  It must be remembered that the
    purpose of a
Carter
charge is to instruct the jury on how to analyze
    evidence it has already heard.  Indeed, where the Crown is alleging a joint
    plan to commit a crime, whether as parties or co-conspirators, the trial judge
    is required to give this charge in order to make sure that the jury properly
    applies the evidence against each accused: see
R. v. Puddicombe
, 2013
    ONCA 506, at para. 57.

[25]

The
    appellants also submit, in paragraph 16 of their factum, that the trial judge
    erred in explaining to the jury how evidence on one charge could be applied to
    other charges before the court, thereby prejudicing the Appellants defence to
    a degree capable of affecting the jurys verdict.  Neither in the factum nor
    in oral argument did the appellants narrow this submission to a specific
    portion of the jury instruction.  In any event, as I read the trial judges
    charge on this issue, it faithfully tracks the structure and language of
Carter
,
Bogiatzis
and
Puddicombe
.

(2)

Jury charge  proven facts versus allegations

[26]

The
    appellants submit that the trial judge misdirected the jury by treating certain
    aspects of the evidence as if it were proven fact as opposed to allegations.

[27]

I
    am not persuaded by this argument.  Several times throughout the charge, the
    trial judge instructed the jury that they were the sole arbiter of the facts. 
    The Crown called 28 witnesses and tendered more than 250 exhibits.  The defence
    called no evidence and its case rested primarily on points made in
    cross-examination.  The two defence closing addresses, anchored in considerable
    detail in the points made in cross-examination, took a day a half to deliver
    and were followed, an hour later, by the jury charge.

[28]

The
    trial judges summary of the Crown and defence cases was fair and even-handed. 
    He properly said that he would review the evidence relied on by the Crown. 
    However, he also provided a detailed overview of the defence positions,
    including the summaries prepared by defence counsel.  Moreover, he prefaced his
    formal charge on the parties positions with this instruction:

I do not intend to repeat what counsel have said to you but
    simply to provide the summary of their respective positions, and it is done to
    try to assist you.  You must, of course, take their positions from what they
    told you in their addresses to you, not from the summary that I am now
    providing to you.

[29]

In
    summary, in the context of a long trial with many Crown witnesses, no evidence
    from the defence, and a defence case resting on cross-examinations and closing
    addresses, the trial judges jury charge, including his treatment of the
    evidence led by the Crown, was balanced.  He left the job of finding the facts
    to the jury.

(3)

Crown closing remark

[30]

In
    the course of Crown counsels closing address to the jury, he said:

Now, I anticipate, ladies and gentlemen, that the defence will
    be suggesting to you that there are a host of other persons that committed
    fraud, that are, to use the phrase, that are the real fraudsters.

I respectfully suggest to you, ladies and gentlemen, that this
    defence is really a sleight of hand.  And by sleight of hand, were talking
    about what magicians do when they want to draw attention here so that it takes
    your focus away from here.  Its a sleight of hand, ladies and gentlemen,
    because it draws attention away from the real question.  It matters not if
    others are guilty, because the question you are sworn to answer is whether or
    not the accused are guilty beyond a reasonable doubt.

[31]

Both
    defence counsel objected to this submission.  One of them described it as
    inflammatory derogatory, and  a disservice to the administration of justice.

[32]

Crown
    counsel responded:

With respect to the colourful language I used, Your Honour, I
    certainly in no way meant to disparage defence counsel but meant to illustrate
    my exact point, which was to keep their focus on the issue at hand, as opposed
    to being deflected by evidence which wouldnt help them answer the question
    that theyre sworn to do.

...

I just want to apologize if it could be taken that way.

[33]

The
    trial judge agreed with defence counsels position.  Defence counsel suggested
    that the trial judge comment on this issue before they made their closing
    addresses.  The trial judge agreed and, when the jury came into the courtroom,
    he told them:

Before defence counsel addresses you this morning, there is
    just one matter I wish to bring to your attention.

At the close of the Crowns address to you yesterday, he made a
    reference to anticipated defence comments and used an unfortunate analogy of
    sleight of hand, that the defence were endeavouring to use sleight of hand. 
    That may have unintentionally conveyed to you that defence counsel have been
    endeavouring to use trickery to distract you from your task with respect to
    determining whether the accused were involved in these mortgage financing
    frauds.

Both defence counsel, as all the counsel who appear before the
    Court, are officers of the Court.  These counsel have been defending their
    clients completely within the ethical bounds of the profession, and you should
    not take the analogy as disparaging their conduct as defence counsel on behalf
    of their clients, ladies and gentlemen.

[34]

Neither
    defence counsel objected to the contents of this comment by the trial judge. 
    Neither applied for a mistrial.

[35]

On
    appeal, the appellants raise this issue again, contending that the trial judge
    did not sufficiently address it with the jury.

[36]

I
    reject this submission, for two reasons.  First, the trial judges comment to
    the jury was almost word-for-word what defence counsel requested.  Second, the
    alleged impropriety in the Crowns closing is not apparent to me; the impugned
    language strikes me as reasonable adversarial rhetoric.

(4)

Sentence  the imprisonment
    component

[37]

The
    appellants contend that the trial judge erred by concluding (at para. 93) that
    the appropriate range of sentence for the type of frauds committed by these
    offenders is 3 to 5 years.  In support of this conclusion, the trial judge
    cited several cases, including two from this court,
R. v. Dobis
(2002), 163 C.C.C. (3rd) 259, and
R. v. Bogart
(2002), 167 C.C.C. (3rd)
    390.

[38]

The
    appellant submits that sentences in this range are restricted to cases
    involving all three of these factors  (1) a large scale fraud, (2) committed
    by a person in a position of trust, (3) with devastating consequences for the
    victims: see
Dobis
, at para. 42.  The appellant asserts that factors
    (2) and (3) are missing in this case: the appellants were not in a position of
    trust with the principal victims, the financial institutions and, especially,
    CMHC; and it would be a huge exaggeration to label the consequences for these
    victims as devastating.

[39]

I
    do not agree with this submission.  In my view, the trial judge was alive to
    the relevant case law, and his description of the nature of the fraud committed
    by the appellants and its impact on the various victims, personal and
    institutional, led him to fix a range supported by the case law: see G.R.
    Clewley, P.G. McDermott, and R.E. Young,
Sentencing: The Practitioners Guide
,
    looseleaf (Toronto: Canada Law Book, 2013), at para. 10.30.  The four-year
    custodial sentences imposed are within the appropriate range for this
    large-scale, sophisticated fraud, even though the appellants were not in a
    position of trust with the financial institutions or, in a legal sense, with
    all of the personal victims, and the consequences for the primary victim  the
    public purse  were not devastating.

[40]

The
    trial judge said this on the breach of trust issue (at paras. 84 and 86-87):

Counsel contends that the aggravating factors of breach of
    trust and devastating consequences to victims in relation to large scale frauds
    noted in
Bogart
,
Dobis
and
Drakes
, relied on by the
    Crown are absent in this matter.



The accused were not in a position of trust with respect to the
    financial institutions they deceived.  However, in the conduct of their scheme
    they violated the trust of those who agreed to either assist them or invest
    with them.  Some had their identities stolen and became entangled in the subsequent
    default proceedings and investigations.  The Vinniks believed that Ms. Reznik
    would help them through their difficult financial circumstances.  The Graniks
    and Vinniks, had an expectation the accused, Mr. Khatchatourov would
    legitimately manage their investments, through Canada Suites.  Further, the
    accused misused and fabricated numerous powers of attorney to effect their
    fraudulent scheme.



Defence counsel argued that the only victims were the named
    financial institutions in the indictment, and others such as the Vinniks and
    Graniks or persons whose identities were misused, the nominees should not be
    considered victims by the court in the assessment of an appropriate sentence. 
    The breadth of the financial devastation may not have been as great as in cases
    such as
Drakes
, but the financial consequences were significant
    nonetheless.  There was financial loss to the Vinniks and the Graniks.  The Vinniks
    lost their home and they went bankrupt.  They may have been ancillary victims
    or collateral damage in the greater scheme to defraud financial institutions,
    but they were still victimized by the offenders predatory exploitation of them
    as a means to commit the frauds.

[41]

With
    respect, this is a nuanced and attractive analysis of the breach of trust
    issue.  Three of the counts involved the Graniks, who were in a traditional or
    classic relationship of trust with the appellants by virtue of the power of attorney
    Mr. Granik had given to Ms. Reznik. The appellants conduct with respect to the
    Vinniks was also very serious.

[42]

Moreover,
    in assessing the nature of the fraud, the trial judge was entitled to consider
    that all of the personal victims were new immigrants to the country.  They were
    trying to establish their careers, finances and homes, and they counted on 
    trusted, in the non-legal sense of the word  the appellants to help them with
    those affairs.  Instead, what the appellants did was place them in a giant mess
    of criminal and civil proceedings.  As the trial judge said, [t]he accused
    ensnared many others in their scheme, some falling under suspicion and
    investigation by the police.

[43]

The
    misuse of the identities of the individuals drawn into these offences was not
    limited to subsequent blemishes on their credit ratings and the inconvenience
    of testifying in court proceedings. The trial judge found that the Graniks and Vinniks
    suffered financial loss as a result of the offences. The Vinniks received
    nothing from their condominium property investment with the appellants, they
    lost the home that they had transferred to Ms. Rezniks interest, they were
    investigated by the RCMP as part of the fraud investigation, and they
    ultimately declared bankruptcy.

[44]

Finally,
    the fact that the principal victim of the appellants fraud was CMHC, a
    government agency, does not diminish the seriousness of the crime.  A fraud on
    government is not a victimless crime; it takes money from the public purse
    and, therefore, from all those who rely on it: see
Bogart
, at para.
    23.

[45]

For
    these reasons, I conclude that the trial judge did not err by finding that the
    range for fraud offences like the ones committed by the appellants was three to
    five years.  The appellants activities were a sophisticated, long term, large
    scale fraud; the victims included several recent immigrants who trusted, in
    various ways, the appellants; the principal victim, CMHC, lost more than
    $1,000,000; two immigrant families were hurt financially; and many personal
    victims were hurt by becoming ensnared in the appellants criminal scheme.  It
    follows that the actual sentence imposed on the appellants  four years
    imprisonment  was a fit sentence.

(5)

Sentence  the fine in lieu of forfeiture component

[46]

Pursuant
    to s. 462.37(3) of the
Criminal Code
, the trial judge imposed fines in
    lieu of forfeiture on Mr. Khatchatourov and Ms. Reznik in the amounts of
    $423,580.41 and $71,954.63 respectively.  The appellants contend that the trial
    judge erred in three respects in imposing these fines.

[47]

First,
    the appellants assert that the trial judge erred by imposing fines in lieu of
    forfeiture in the absence of evidence that the property (i.e. money) that might
    be subject to a forfeiture order could not be located with reasonable
    diligence.

[48]

I
    disagree.  Section 462.37(3) of the
Criminal Code
authorizes a court
    to impose a fine in lieu of forfeiture in any of five circumstances, including
    if the property

(a) cannot, on the exercise of due diligence, be located or



(e) has been commingled with other property that cannot be
    divided without difficulty.

[49]

The
    trial judge applied (e); it was, therefore, not necessary for him to consider
    (a).  In any event, as the trial judge noted in his sentencing reasons, Mr. Khatchatourovs
    trial counsel conceded that the criteria for a fine in lieu of forfeiture are
    met in this instance.

[50]

Second,
    the appellants submit that the trial judge erred by imposing fines in lieu of
    forfeiture in the absence of proof that they received the funds that served as
    the basis for the fine amounts, $423,580.41 for Mr. Khatchatourov and
    $71,954.63 for Ms. Reznik.  They argue that there was insufficient evidence
    that the appellants had possession or control over the funds, and therefore
    that the Crown had not proved the funds were property as defined in s. 2, and
    for the purpose of s. 462.37(3), of the
Criminal Code
.

[51]

I
    do not accept this submission.  Mr. Khatchatourovs counsel said this at the
    sentence hearing:

[C]ertainly it is open to Your Honour to say: Well, look,
    these cheques were made payable to him.  Who knows what happened from there but
    its a reasonable inference that he got that money or had control of that money.

[52]

This
    common sense concession is consistent with the evidence, which was that Mr.
    Khatchatourov and Ms. Reznik received cheques, made out in their names, from
    the fraudulent transactions totalling the precise amounts of the two fines. 
    Absent some evidence (for example, testimony from the appellants at their
    sentence hearing) that the appellants did not cash the cheques and receive the
    funds, I see no reason to impose a duty on the Crown to take additional steps
    (for example, a tracing exercise) to try to obtain further proof that the
    appellants actually received the money generated by their frauds.  Their
    receipt of the cheques is enough.  Even in the increasingly complicated world
    of Canadian criminal law, some things are obvious.

[53]

Third,
    the appellants assert that the trial judge erred in his analysis of the
    relationship between a fine in lieu of forfeiture and a concurrent restitution
    order.  The trial judge held that if the appellants served terms of
    imprisonment in default of paying their fines (three years for Mr.
    Khatchatourov and 18 months for Ms. Reznik), the restitution order would
    survive.  He said (at para. 122):

The Crown suggested that in order to alleviate any concern the
    restitution order could contain provision that the amount with respect to the
    fine could be subtracted from the restitution order should the offenders be
    imprisoned for default in payment of the fines in lieu of forfeiture.  In my
    view, such a reduction would be contrary to the objectives of the proceeds of
    crime provisions that require punishment for non-payment in order to impress on
    the offender and others that crime does not pay, and the objective of a
    restitution order to compensate victims for loss.  On making the restitution
    order there is nothing to prevent the victim from proceeding to filing the
    order to obtain judgment in the full amount ordered as permitted by s. 741 of
    the
Criminal Code
.

However, it would be appropriate to ensure payment of the fine
    in lieu of forfeiture is credited to the amount of restitution ordered that
    there is a term to that effect in the proceeds of crime order.

[54]

The appellants submit that the effect of these two paragraphs is
    this: if the appellants pay their fines, every cent of the restitution order
    will disappear; however, if the appellants serve their additional terms of
    imprisonment in lieu of paying their fines, every cent of the restitution order
    will survive and be enforceable.  This juxtaposition, says the appellants, is
    unfair.

[55]

I do not accept this submission.
    In my view, the real question is why, if payment of the fine reduces the amount
    owed on the restitution order, imprisonment in default should not. The answer
    lies in the reason for the imprisonment in default. It is
not
an addition
    to the sentence. The objective of forfeiture is not punishment, but to deprive
    the offender of the proceeds of crime and to deter him or her from committing
    crimes in the future.

[56]

If the offender does not pay the
    fine in lieu of forfeiture without reasonable excuse, the offender serves a
    mandated period of imprisonment. This is a substitute for the fine:
R. v.
    Lavigne
, [2006] 1 S.C.R. 392, at paras. 16 and 26. As this court noted
    some years ago, a subsequent imprisonment imposed for a default in payment of
    a fine imposed under s. 734.7 [a warrant of committal for non-payment of a
    fine] is not a punishment; rather it is an enforcement mechanism designed to
    give serious encouragement to offenders with the means to pay a fine to make
    payment:
R. v. Bourque
(2005), 193 C.C.C. (3d) 485 (Ont. C.A.), at
    para. 20.

[57]

Sections 734.8(2) and (3) of the
Criminal
    Code
provide that as the fine is paid off, the potential period of
    imprisonment in default is reduced commensurately. This scheme operates
    entirely independently from the restitution order. It does not follow that just
    because the payment of fine reduces the restitution order amount, the imprisonment
    served in default should reduce the restitution amount.

[58]

The reason the amount owing on the
    restitution order is reduced as the fine in lieu of forfeiture is paid off is
    not because these orders are imposed for the same reason, but that legislation
    prioritizes the reimbursement of the victims over collecting on fines destined
    for general revenues: s. 462.92(2) of the
Criminal Code
, and s. 14.6 of
    the
Crown Attorneys Act
, R.S.O. 1990, c. C.-49.

[59]

Further, these considerations are
    premature. Both appellants were given a very generous amount of time to pay:
    four years after release from incarceration. It is not a foregone conclusion
    that either of them will be unable to pay in the future. They are relatively
    young and can work for the money or may receive a windfall:
R. v. Wu
,
2003 SCC 73, at para. 33
.

[60]

Even if they have not paid their
    fines by the end of four years after their respective releases from custody,
the appellants would have a
    hearing before another court before serving time in default. That court would
    only issue a warrant of committal if the appellants had
refused
to pay
    or discharge the fine
without reasonable excuse
: s. 734.7(1)(b)(ii),
R.
    v. Wu
, at paras. 60-66.

The defaulting appellant would have the opportunity to
    show that he or she was unable to pay the fine. If the court determined that
    the appellants were unable to pay, this would constitute a reasonable excuse
    and a warrant of committal would not issue:
Bourque
, at para. 16. The
    courts at that stage would have better information than this court has now
    about their willingness and ability to pay.

[61]

I do not see any reversible error
    on the part of the sentencing judge in refusing (despite the fact that the
    Crown suggested it at the sentencing hearing) to reduce the restitution order
    by an amount that reflects any time that may be served in default of payment.
    If such time is ever served, it will be served after all of the financial
    circumstances and willingness to comply of the appellants are taken into
    consideration, and it will be served for a different purpose than the time
    served on the fraud sentence.

(6)

Sentence
     the restitution component

[62]

Pursuant to s. 738 of the
Criminal
    Code
, the trial judge made a restitution order of $495,535.04 in favour of
    CMHC.  This order was made against both appellants jointly and severally.  He
    said (at para. 125):

In this instance, the offenders were involved in a joint and
    common enterprise to defraud the financial lending institutions.  While the
    financial institutions were the direct victims, they were compensated through
    insurance CMHC.  It is not a victimless crime as some might suggest.  The
    frauds caused loss to the public purse and the public should be compensated.

[63]

The appellants contend that the
    trial judge erred in two respects in making the restitution orders.

[64]

First, the appellants submit that
    the trial judge made no inquiry into the appellants ability to pay a very
    large restitution order.

[65]

I do not accept this submission.  Both
    defence counsel did make submissions on their clients ability to pay a restitution
    order in their sentencing submissions.  The trial judge acknowledged their respective
    positions about their clients financial circumstances, but did not accept that
    there was an inability to pay.  He noted that the appellants were still
    relatively young, with time to work for the money to pay the order, and that
    Mr. Khatchatourovs business was doing well.  He also took into account,
    appropriately, that the appellants had offered no explanation of what happened
    to the money that had been illegally obtained.

[66]

Second, the appellants contend
    that the restitution order should not have been joint and several; rather each
    appellant should have been responsible for only his or her share of the
    calculation that led up to the total amount of the order, i.e. $423,580.41 for
    Mr. Khatchatourov and $71,954.63 for Ms. Reznik.

[67]

I disagree.  The trial judge found
    that the appellants were equal participants in a joint and common enterprise
    and as such, they are equally responsible for the loss they created.  It is
    true that Ms. Rezniks profit from the illegal scheme was about one-sixth of Mr.
    Khatchatourovs; however, Ms. Rezniks active role in the frauds enabled Mr.
    Khatchatourov to reap his substantial financial gain.  Accordingly, it is not
    unfair to make both appellants liable for the full amount of the restitution
    orders.

E.

Disposition

[68]

The conviction appeals are
    dismissed.  Leave to appeal the sentences is granted, but the sentence appeals
    are dismissed.

Released: June 16, 2014 (A.H.)

J.C. MacPherson J.A.

I agree Alexandra Hoy
    A.C.J.O.

I agree R.A. Blair J.A.





[1]
In oral argument, the court did not call on the Crown to respond to the three
    issues relating to conviction.


