



COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Rafilovich, 2017 ONCA 634

DATE: 20170803

DOCKET: C58056 & C58108

Weiler, Hourigan and Pardu JJ.A.

BETWEEN

Her Majesty the Queen

Appellant
    (C58056)/

Respondent (C58108)

and

Yulik Rafilovich

Respondent
    (C58056)/

Appellant (C58108)

Bradley Reitz and Sarah Egan, for the appellant (C58056)
    and respondent (C58108)

Gregory Lafontaine, for the respondent (C58108) and appellant
    (C58056)

Heard: July 5, 2017

On appeal from the sentence imposed on November 25, 2013
    by Justice Bonnie L. Croll of the Superior Court of Justice, sitting without a
    jury.

Pardu J.A.:

[1]

These appeals are about fines in lieu of
    forfeiture for proceeds of crime and forfeiture of offence related property.

[2]

Mr. Rafilovich pleaded guilty to two counts of
    possession of cocaine for the purpose of trafficking and two counts of
    possession of property obtained by crime. The offences occurred on two separate
    occasions, about 13.5 months apart, in two different homes and in a vehicle. The
    police found tools typically associated with drug trafficking, such as a cash,
    a counting machine and scales, in one of the homes. In all, police seized 560
    grams of cocaine, $41,130.51 Canadian cash and US$651 in American funds.

[3]

Some four years before sentencing, Mr.
    Rafilovich had obtained an order that the seized funds be released to pay his
    legal fees for the defence of these charges pursuant to s. 462.34(4)(c)(ii) of
    the
Criminal Code
.

[4]

The sentencing judge refused to order a fine in
    lieu of forfeiture of the seized funds previously paid to counsel. Although the
    proceeds of crime had been transferred to a third party, and the statutory
    prerequisites were met for a fine in lieu of forfeiture, the sentencing judge
    held that it was in her discretion whether to order fine in lieu of forfeiture
    because s. 462.37(3) of the
Code
provides that
    a court 
may

order a fine
    in lieu of forfeiture. She noted the different approaches to the issue adopted by
    the Saskatchewan and Newfoundland Courts of Appeal, but concluded that since
    Mr. Rafilovich needed the money to pay for his lawyer, a fine in lieu of
    forfeiture was not appropriate. She wrote as follows:

It was necessary for the seized funds to be
    released to counsel as Mr. Rafilovich had no other monies available for legal
    fees and did not qualify for legal aid under the Ontario Legal Aid plan.
    Indeed, the Crown had opposed the application for the releases of funds for
    legal expenses, but the court at that time considered the release to be
    appropriate. There is no evidence to suggest that Mr. Rafilovich had other
    means or assets to pay his legal expenses. Mr. Rafilovich obtained no benefit
    from these funds other than enabling him to pay for legal representation to
    which he is constitutionally entitled. There is no evidence that he has
    squandered any other assets or chosen to divert assets to other purposes,
    except to pay counsel. In sum, Mr. Rafilovich did not profit from his crime;
    the proceeds to crime were used in their entirety to pay his legal fees
    pursuant to a judicial order.

Finally, as provided in s. 462.17(4), if the
    offender does not pay the fine, he or she is subject to imprisonment. For Mr.
    Rafilovich, the imprisonment would be between 12 and 18 months. This would
    subject Mr. Rafilovich to a longer term of imprisonment than a similarly
    situated offender who had funds for his or her legal expenses or who qualified
    for legal aid.

[5]

The Crown appeals. It submits that Mr.
    Rafilovitch applied the proceeds of crime for his own benefit. It submits that
    the limited discretion provided to a sentencing judge by s. 462.37(3) is
    not a basis to refuse a fine in lieu of forfeiture where funds have been
    released to pay legal fees.

[6]

The trial judge also dealt with an application
    for forfeiture of offence related property pursuant to s. 16(1) of the
Controlled
    Drug and Substances Act
, S.C. 1995, c. 19 (
CDSA
). Mr. Rafilovich co-owned a condominium unit with his mother  unit
    4304 at 210 Victoria Street in Toronto. He used it for trafficking in drugs. As
    of the date of sentencing, his half interest in the property had a net value of
    $100,000. He submits that partial forfeiture to the extent of only $55,000
    should be ordered. The property was subject to a restraint order made by
    Forestell J. on November 10, 2008. Since that time, he had made the mortgage
    payments, maintained the property and collected rental income from the property.
    The defence argued that, under those circumstances, forfeiture of his entire
    interest in the property as of the date of sentencing some five years later
    would be disproportionate under s. 19.1(3) of the
CDSA
. He argued that forfeiture should be limited to at most, the value
    of his equity in the property as of the date of the restraint order, which he
    calculated at about $55,000.

[7]

The sentencing judge disagreed. She noted that
    while the home was not used for a grow operation, it was evident from the
    equipment, drugs and money found within that preparations for trafficking took
    place in the home. This was not a case where any person was residing in the
    home. In the end, the sentencing judge concluded:

While the forfeiture order sought has a
    financial impact on Mr. Rafilovich, when this is measured against the quantity
    of the drugs and the evidence of commercialism in these offences, I am not
    persuaded that there is any disproportionality in the forfeiture of the entire
    value of Mr. Rafilovichs interest in the condominium.

The sentencing judge fixed the amount
    of Mr. Rafilovichs 50 per cent interest in the condominium unit at $100,000
    and ordered forfeiture of that amount.

[8]

Mr. Rafilovitch appeals from this decision,
    renewing his argument on appeal that forfeiture should have been limited to
    $55,000.

A.

statutory background: Proceeds of Crime

(1)

Statutory Provisions

[9]

Section 462.3(1)(a) of the
Code

defines proceeds of crime broadly as any property, benefit or
    advantage obtained or derived, directly or indirectly as a result of the
    commission of a designated offence.

[10]

Section 462.37(1) provides for a mandatory order
    of forfeiture of property that is proceeds of crime where the designated
    offence was committed in relation to that property.

[11]

Section 462.37(3) provides that if the
    conditions are met for an order for forfeiture of property, but the property
    cannot be made subject to a forfeiture order, for example because it cannot be
    located or has been transferred to a third party, a court may order the
    offender to pay a fine.

[12]

Section 462.37(4) mandates a term of
    imprisonment in default of payment of the fine in lieu of forfeiture, based on
    the amount of the fine. In this case the fine in lieu of forfeiture would be
    between 12 and 18 months.

(2)

Standard of Review

[13]

This court has held that the standard of review
    of a decision concerning a fine in lieu of forfeiture is the usual one
    applicable to all sentence appeals. In
R. v. Angelis
,
2016 ONCA 675, 340
    C.C.C. (3d) 477, at para. 22, leave to appeal refused, [2016] S.C.C.A. No. 484,
    it stated:

An order made under s. 462.37, including an order refusing to
    direct payment of a fine in lieu of forfeiture under s. 462.37(3), is a
    sentence within s. 673 of the
Criminal Code
. As an appeal from
    sentence, and as a discretionary order, the trial judges conclusion is subject
    to deference in the absence of an error in principle, a failure to consider a
    relevant factor, consideration of an irrelevant factor, overemphasis of
    appropriate factors or a decision that is plainly unreasonable. Appellate
    intervention is justified only where it appears from the trial judges decision
    that an error had an impact on the result. [Citations omitted.]

(3)

Purpose of Forfeiture of Proceeds of Crime

[14]

The
    purpose of the forfeiture provisions of the
Criminal Code
is to
    deprive the offender of the proceeds of his or her crime and to deter him or
    her from committing crimes in the future. This is different from the general
    sentencing provisions which aim to punish an offender for committing a
    particular offence. In
R. v. Lavigne
, 2006 SCC 10, [2006] 1 S.C.R.
    392, at para. 16, Deschamps J. stated:

Parliaments intention in enacting the forfeiture provisions
    was to give teeth to the general sentencing provisions.  While the purpose
    of the latter provisions is to punish an offender for committing a particular
    offence, the objective of forfeiture is rather to deprive the offender and the
    criminal organization of the proceeds of their crime and to deter them from
    committing crimes in the future.  The severity and broad scope of the
    provisions suggest that Parliament is seeking to avert crime by showing that
    the proceeds of crime themselves, or the equivalent thereof, may be forfeited.

[15]

Where
    the property itself is no longer available for forfeiture, the court has a
limited
discretion to refuse to order a fine in lieu of
    forfeiture under s.
462.37(3) of the
Code
.
    Deschamps J. stated at paras. 27 and 32 of
Lavigne
:

The effect of the
    word may cannot therefore be to grant a broad discretion. The exercise of the
    discretion is necessarily limited by the objective of the provision, the nature
    of the order and the circumstances in which the order is made.



The mere fact that
    the property has been used cannot therefore justify exercising the discretion
    to reduce the amount of the fine, especially where the property consists of
    cash. The fact that the offender no longer has enough money must not therefore
    serve as a way to avoid a fine. A fine can be ordered only if the property
    cannot be forfeited or if forfeiting it is impracticable. Moreover,
    s. 462.37(3)(d) is significant: a fine may be imposed where the property
    has been substantially diminished in value. The purpose of the order, to
    replace the property, would be thwarted if the offender could avoid the fine
    simply by spending the proceeds of the crime.

[16]

A judge cannot transform circumstances in which a fine may be ordered
    instead of forfeiture into circumstances that justify not imposing a fine.
    Deschamps J. stated at para. 24 see
Lavigne
:

The list of circumstances in which the court may,
inter alia
, impose a fine instead of forfeiture
    also illustrates the limits of the discretion. For instance, the discretion may
    be exercised (a) where the property cannot, on the exercise of due diligence, be
    located or (b) where the property has been transferred to a third party. The
    list does not appear to be restrictive, given the use of the expression in
    particular, which suggests that there are other circumstances that do not
    appear on the list. However, those circumstances must be similar in nature to
    the ones that are expressly mentioned. The judge could not therefore decline to
    impose a fine simply because the offender is no longer in possession of the
    property or simply because (c) the property is located outside Canada. Thus,
    the judge cannot transform circumstances in which a fine may be ordered instead
    of forfeiture into circumstances that justify not imposing a fine.

[17]

The amount of the fine is intended to be equal to the value of the
    proceeds of crime it replaces:
Lavigne
at para.
    35.

B.

Analysis

(1)

Fine in Lieu of Forfeiture

[18]

There is no doubt in the present case that the accused profited from
    his crime and received proceeds of crime. The fact that he has spent that money
    on legal fees, and that the funds have for that reason been transferred to a
    third party, is no basis, according to the principles enunciated in
Lavigne
, to refuse to impose a fine equal to the amount of proceeds of crime that
    were his profits he earned from his drug trafficking.

[19]

An example of circumstances set out in
Lavigne
, at para. 28,
as
    potentially justifying the exercise of discretion to refuse an order for a fine
    would be if the offender did not profit from the crime and if it was an
    isolated crime committed by an offender acting alone. Those circumstances are
    not present here.

[20]

The possibility that a court may release some of the funds before
    sentencing for reasonable living expenses, or reasonable business and legal
    expenses pursuant to s. 462.34 (4) if an applicant has no other assets or means
    available for those purposes, is compatible with subsequently ordering a fine
    in lieu of forfeiture that intended to deprive the accused of the fruits earned
    from criminal activity. This proposition is supported by the
obiter
comments of Doherty J.A. in
Wilson v. R
(1994) 15 O.R. (3d) 645 (C.A.), at p. 660:

If a person on whose behalf
    funds were released to pay reasonable legal expenses is found guilty of an
    enterprise crime, and if the other criteria for forfeiture are met, then the entirety
    of the seized property including that which has been released for payment of
    legal fees, will be subject to forfeiture under s. 462.37. The part of the
    property that has been transferred to the offender's lawyer for the payment of
    legal fees, would, however, no longer be available for forfeiture. The
    sentencing judge could then turn to s. 462.37(3), and if appropriate, impose a
    fine on the offender in an amount equal to the fees paid to his or her lawyers.
    In this way the ultimate purpose of Part XII.2 would be served, while at the
    same time allowing the accused access to the seized property for the purposes
    of paying reasonable legal expenses.

[21]

In my view, the sentencing judge erred in principle when she refused to
    order a fine in lieu of forfeiture. Mr. Rafilovich did profit from his crime. He
    earned over $41,000 from that activity. Following the principles enunciated in
Lavigne
, the fact that he has spent that money, albeit for legal fees, is no
    bar to a fine replacing the fruits of his crime. I agree with the views
    expressed in that regard by Wilkinson J.A. of the Saskatchewan Court of Appeal in
R. v. Smith
, 2008 SKCA 20, 232 C.C.C. (3d) 176,
    at para. 103:

In
R. v. Martin
, a case cited by the respondent, the
    Court said that it could easily envisage circumstances where a fine should be
    imposed in an amount paid out of seized funds pursuant to judicial
    authorization, whether for living expenses, business expenses, or legal
    expenses. One circumstance was where criminal organization offences were implicated.
    Another circumstance was if it should later be discovered that the accused had
    assets that were not divulged. Another would be a case of squandering of assets
    as was the case in
Lavigne
. Consequently, the Court rejected the
    defence argument that the amount judicially authorized to be spent on legal
    fees was not property for the purposes of s. 462.37. [Footnotes omitted.]

[22]

Furthermore, the sentencing judge erred when she considered that
    imposing a fine in lieu of forfeiture would subject Mr. Rafilovich to a longer
    term of imprisonment than a similarly situated offender who had funds for his
    or her legal expenses or who qualified for legal aid.

[23]

The purposes of forfeiture orders and fines in lieu are to extract the
    profits of criminal activity from offenders. They are not part of the
    individualized, general sentencing provisions aimed at sentencing an offender
    for committing a particular offence: see
Lavigne
,

at para. 16.

[24]

Under s. 734.7(1) of the
Code
, a warrant
    of committal for the imprisonment of an offender in default of payment of a
    fine imposed in lieu of forfeiture shall not be issued unless the offender has
    the means to pay the fine but has refused to do so without reasonable excuse:
    see
R v. Wu
, 2003 SCC 73, [2003] 3 S.C.R. 530, at
    para. 31; and
Lavigne
, at para. 46. If Mr.
    Rafilovich does not have the means to pay the fine in lieu of forfeiture, that
    would constitute a reasonable excuse for non-payment under s. 734.7(1) and he
    could not be imprisoned.

[25]

I therefore see no injustice in refusing to allow an accused to benefit
    from the proceeds of crime, and requiring him to account for those funds, even
    if some of them have been released for payment of legal fees or living expenses.

[26]

Accordingly, I would vary the sentence imposed to add a fine in lieu of
    forfeiture in the sum of $41,131.39, plus $845.00, the latter being roughly
    equal to US$651.00 American dollars, for a total of $41,976.39.

[27]

In default of payment of this fine, the accused is sentenced to 12
    months imprisonment.

(2)

Forfeiture of Offence-Related Property

[28]

Offence related property is defined in s. 2(1) of the
CDSA
as any property,

(a)     by means of or in respect of which a designated substance
    offence is committed

(b)     that is used in any manner in connection with the commission of
    a designated substance offence, or

(c)     that is intended for use for the purpose of committing a
    designated substance offence

[29]

The appellant concedes that the 210 Victoria Street condominium unit was
    offence-related property.

[30]

Section 16(1) of the
CDSA
provides that
    where a person is convicted of a designated offence, and the court is satisfied
    that any property is offence-related property, and that the offence was
    committed in relation to that property, the court shall order that the property
    be forfeited.

[31]

Section 19.1(3) of the
CDSA

provides that,
    if a court is satisfied that the impact of an order of forfeiture would be
    disproportionate to the nature and gravity of the offence, the circumstances
    surrounding the commission of the offence and the criminal record, if any, of
    the person convicted, a court may decide not to order forfeiture of the
    property or part of the property.

[32]

Following the sentencing judges decision that the whole of Mr.
    Rafilovichs equity in the property should be forfeited, counsel for Mr.
    Rafilovich asked the sentencing judge to fix the value of his equity in the
    property at $100,000 as of the date of the sentencing hearing. If the property
    increased in value, he did not want this to increase the amount to be forfeited.
    The Crown did not oppose that request and indicated that he thought that was
    about right, in that neighbourhood for sure.

[33]

Mr. Rafilovich argues on appeal that the sentencing judge should have
    inferred from the purchase price in 2004 ($213,342.27), and an appraisal in
    2012 ($325,000), that the property as a whole was worth $270,000 at the time of
    the restraint order of Forestell J. in November 2008. He also suggested that the
    indebtedness incurred to purchase the property in 2004, $25,000 for a line of credit
    and a mortgage of $156,030, were likely reduced to $22,000 and $135,640.20 by
    the time of the restraint order. He submits that the value of the equity as of
    the date of the restraint order was $56,500, and that, in light of his
    maintenance of the property and payment of the carrying expenses since the
    restraint order, this lesser amount should be forfeited instead of the $100,000
    ordered by the trial judge. Mr. Rafilovich also rented the property. The record
    does not permit a precise calculation of his income and expenses related to the
    property.

[34]

Given the agreement of all counsel as to the amount that accurately
    reflects the impact of the sentencing judges forfeiture order, there is no
    basis to interfere with the sentencing judges decision.

[35]

Section 19(3) of the
CDSA
provides for
    forfeiture of property following conviction. An order for forfeiture of
    property implies the loss of property and sale by the Crown to realize the
    value of the property. Section 16(1)(b) specifically provides that the property
    is to be disposed of by a province or Canada.

[36]

Here, the sentencing judge was asked to decide whether the whole or
    part of Mr. Rafilovichs interest in the property should be forfeited. After
    she made that decision, both Crown and defence counsel asked the sentencing
    judge to quantify the amount that should be forfeited, and they agreed to the
    amount. There is no basis to say that her decision that the whole of the
    accuseds interest should be forfeited did not properly apply the principles of
    proportionality required.

[37]

Calculation of an amount that is proportionate to the nature and
    gravity of the offence, the circumstances surrounding the commission of the
    offence and the criminal record, if any, of the accused, all non-financial
    considerations, is not an exact science. A sentencing judge is not to be
    expected to embark on a detailed accounting of income and expenses related to
    the property or fluctuations in the property value where, as here, no
    sufficient evidence was presented to the sentencing judge for consideration and
    counsel agreed on the value of the appellants interest in the property.

[38]

Accordingly, I would dismiss the appeal by Mr. Rafilovich from the
    order fixing the amount forfeit for his interest in the condominium at
    $100,000.00

G. Pardu J.A.

K.M. Weiler J.A.

C.W. Hourigan J.A.

Released: August 03, 2017


