Constitutionality of mandatory minimum sentences for Criminal Charges of Fraud Over $5000.00; and GST Fraud

Published On: Aug 20,2019

Fraud Under 5000
The Constitutionality of the Mandatory Minimums of Fraud Over $5000.

The constitutionality of mandatory minimums has been challenged in a number of cases involving a range of Criminal Codecharges.  There was been a vary degree of success involved in these matters, from the perspective of the defence.   The Ontario Court of Appeal had occasion to consider the mandatory minimums in the context of Fraud Over $5000 pursuant to s. 380(1.1) in Regina v. Plange, 2019 ONCA 646. The Court of Appeal allowed the Crown appeal, and overturned the sentencing judges determination that the section was contrary to section 12 of the Canadian Charter of Rights and Freedoms (the “Charter”).  In that case, the offenderpleaded 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.

The Court of Appeal levied a three (3) year sentence with the proviso that it was not in the interests of justice to re-incarcerate the accused. The allegations were that the offender redirected GST refunds, properly payable by the Canada Revenue Agency to various corporations, to bank accounts he controlled. The total amount of the fraud amounted to $41 million. Since the fraud exceeded $1 million, the accused was subject to the two-year mandatory minimum sentence under s.380(1.1). The sentencing judge found s.380(1.1) to be contrary to s.12 of the Charter on the basis of reasonable hypotheticals. He ultimately sentenced the accused to 13 months’ imprisonment (taking into account presentence custody).

Section 12 of the Charter reads:

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

The sentencing judge followed the two (2) step analytical approach to s. 12 claims: Regina v. Nur2015 SCC 15 (CanLII), [2015] 1 S.C.R. 773, at paras. 43-46Regina v. Boudreault2018 SCC 58 (CanLII), 429 D.L.R. (4th) 583, at para. 46; see also Regina v. J.L.M.2017 BCCA 258 (CanLII), 353 C.C.C. (3d) 40 at para. 16Regina v. Forcillo2018 ONCA 402 (CanLII), 141 O.R. (3d) 752, at para. 124; Regina v. Morrison2017 ONCA 582 (CanLII), 136 O.R. (3d) 545, at para. 117, rev’d on other grounds, 2019 SCC 15 (CanLII).

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.  This involved invoking “reasonable hypotheticals”.  There were three (3):

  •     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 offender’s 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 corporation’s 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.

As a result of the foregoing, 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. Based on that finding, the sentencing judge then determined that the impugned provision breached s. 12 of the Charter and was not saved by s. 1.

The majority of the Court of Appeal held that the hypotheticals relied on by the trial judge either did not involve fraud or did not call for a sentence below the mandatory minimum. They could not be used to strike down the section as unconstitutional. The majority further held that it was not the Court of Appeal’s function to construct a new hypothetical in order to declare the mandatory minimum unconstitutional. Finally, the sentence was demonstrably unfit when compared to other large-scale frauds.

In a concurring opinion, Doherty J.A. held that the Court of Appeal should address the merits of the constitutional agreement. He would have found that s.380(1.1) does amount to cruel and unusual punishment, based on a reasonable hypothetical of his own construction. Doherty J. held that the court is obliged to consider any hypothetical it views as a reasonably foreseeable application of the mandatory minimum.

If you have been charged with fraud over $5000 under the Criminal Code of Canada, call Mr. J.S. Patel, Criminal Defence lawyer, at 403-585-1960 for a confidential consultation.