R. v. Hunt, 2018 NLSC 190

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : R. v. Hunt , 2018 NLSC 190 Date : September 25, 2018 Docket : 201301G3482 Her Majesty The Queen v. Hubert walter Hunt Edited Oral Reasons for Judgment Before: Justice Valerie L. Marshall Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: September 20, 2018 Date of Oral Judgment: September 24, 2018 Appearances: Lloyd Strickland and Jeffrey Summers Appearing on behalf of the Crown Derek Hogan Appearing on behalf of the Accused

Authorities Cited: CASES CONSIDERED: R. v. Anthony-Cook , 2016 SCC 43 ; R. v. Druken , 2006 NLCA 67 ; R. v. B.O.2. , 2010 NLCA 19 ; R. v. Colpitts , 2018 NSSC 180 ; R. v. Clarke , 2016 NSSC 101 ; R. v. Plange , 2018 ONSC 1657 ; R. v. Proulx , 2000 SCC 5 . STATUTES CONSIDERED: Criminal Code of Canada , R.S.C. 1985, c. C-46; Canadian Charter of Rights and Freedoms ,

section 11,

part 1 of the Constitution Act , 1982, being

schedule D to the Canada Act, 1982 (UK), 1982, c. 11. ORAL REASONS FOR JUDGMENT (Edited) Marshall, J. : INTRODUCTION [ 1 ] This is the Court’s decision on a joint submission of sentence. [ 2 ] Hubert Walter Hunt is 72 years old. He is a widower, father and grandfather. Mr. Hunt and three co-accused were jointly charged with sixteen counts of fraud, one count of conspiracy to commit fraud, one count of falsification of books and documents, and one count of circulating a false prospectus to defraud creditors. Mr.

Hunt was also charged with one count of circulating a false prospectus to induce a person to advance money. [ 3 ] The charges were laid in November of 2012. They are described in the original indictment which was filed in this Court on July 17, 2013. [ 4 ] The charges emanated from a lengthy investigation which followed the insolvency and bankruptcy of Hickman Equipment Ltd. (“Hickman Equipment”) in 2002. Mr. Hunt had been the Executive Vice President and General Manager of Hickman Equipment [ 5 ] A new indictment was filed September 18, 2018, and amended September 20, 2018.

The new indictment contained one count against Mr. Hunt, being the count of conspiring to commit fraud over $5000, contrary to section 465(1) (

c) of the Criminal Code of Canada , R.S.C. 1985, c. C-46 (the “ Code ”). [ 6 ] On September 20, 2018, Mr. Hunt entered a plea of guilty to the count described in the new indictment. An agreed statement of facts was filed, and a conviction was entered against Mr. Hunt for that count. At the same time, all charges against Mr. Hunt described in the original indictment (filed July 17, 2013) were dismissed. [ 7 ] The charge for which Mr.

Hunt was convicted is described in the new and amended indictment, as follows: Hubert Walter Hunt stands charged: Count 1: That on or between January 1, 2000 and January 1, 2002, at or near St. John’s, Newfoundland and Labrador, did conspire with others to commit the indictable offence of Fraud over $5000, Section 380(1) (

a) Criminal Code of Canada , thereby committing an offence contrary to Section 465(1) (

c) of the Criminal Code of Canada. [ 8 ] Crown and Defence Counsel put forth a joint submission on sentence for a one year term of imprisonment, to be served in accordance with the terms of a conditional sentence order. The Court has accepted the joint submission for the reasons that follow. ANALYSIS [ 9 ] In R. v.

Anthony-Cook , 2016 SCC 43 , at paragraph 32 , the Supreme Court of Canada instructed trial judges to “not depart from a joint submission on sentence unless the proposed sentence would bring the administration of justice into disrepute or is otherwise contrary to the public interest”. [ 10 ] The Supreme Court of Canada elaborated on what this threshold means by referring to two Newfoundland Court of Appeal decisions: R. v. Druken , 2006 NLCA 67 and R. v. B.O.2 . , 2010 NLCA 19 . They stated at paragraph 33 of R. v. Anthony-Cook as follows:

33 In Druken, at para. 29, the court held that a joint submission will bring the administration of justice into disrepute or be contraryto the public interest if, despite the public interest considerations that support imposing it, it is so "markedly out of line with theexpectations of reasonable persons aware of the circumstances of the case that they would view it as a break down in the properfunctioning of the criminal justice system". And, as stated by the same court in R. v.

B.O.2, 2010 NLCA 19, at para. 56 , whenassessing a joint submission, trial judges should "avoid rendering a decision that causes an informed and reasonable public to loseconfidence in the institution of the courts". [11] In Mr. Hunt’s case, the Court has conducted its analysis of the joint submission in light of the Supreme Court of Canada’sdirections in R. v. Anthony-Cook. CIRCUMSTANCES OF THE OFFENCE [12] As General Manager of Hickman Equipment, Mr. Hunt was responsible for the day to day operations at the time the offencewas committed. The agreed statement of facts details Mr.

Hunt’s involvement in the offence. The offence involved the fraudulent use ofa credit program at Hickman Equipment in that credit was extended by John Deere Ltd. (“John Deere”) under false pretenses. As statedat paragraph 55 of the agreed statement of facts, the management at Hickman Equipment “misled John Deere into providing cash loanswith very favourable terms”. [13] By way of background, the agreed statement of facts explains that Hickman Equipment had been a heavy equipment dealer inNewfoundland and Labrador.

Hickman Equipment was one of the Hickman Group of Companies. [14] Hickman Equipment was placed into receivership on March 13, 2002, and a Trustee was appointed. On August 14, 2002, theTrustee issued an investigation report which outlined transactions the Trustee identified as fraudulent. These included the sale offinanced equipment without subsequently notifying financing institutions, as well as the purchase and sale of equipment with companiesdescribed as “seemingly non-existent” (paragraph 14 of the agreed statement of facts).

The Trustee later determined that the realizationof Hickman Equipment’s assets would be approximately $25 million, whereas the creditors’ claims exceeded $110 million. [15] On September 18, 2002, the Superintendent of Bankruptcy issued an order compelling the RCMP to investigate the allegedfraudulent activities that had been identified by the Trustee. [16] In the course of the RCMP’s investigation, the RCMP’s forensic accountant examined transactions between HickmanEquipment and several related companies.

These related companies had been created by the senior management of Hickman Equipment.The forensic accountant reported that Hickman Equipment gained equipment rental and sales revenue from 11 related companies from1997 to 2001. [17] Hickman Equipment’s main product line was John Deere heavy equipment. John Deere Ltd. preferred to have its dealers sellonly John Deere equipment.

However, Hickman Equipment had in its inventory equipment made by other competitors. [18] The President of the Hickman Group of Companies had understood that the related companies were created simply for thepurpose of moving non-John Deere inventory to those related companies, in order that the related companies could sell the non-JohnDeere equipment.

However, the related companies were ultimately used by Hickman Equipment in the plan to obtain credit from JohnDeere under false pretenses. [19] To elaborate, the agreed statement of facts indicated that Hickman Equipment offered credit to its customers through aprogram, which was arranged by John Deere, and referred to as “Powerplan”. Customers who were approved to purchase or rentequipment from Hickman Equipment would owe Powerplan.

Hickman Equipment would be paid outright and immediately for the saleor rental, and Powerplan would become the holder of the account receivable. [20] The agreed facts suggested that in the Fall of 2000 Mr. Hunt directed the accounts receivable clerk at Hickman Equipment toset up Powerplan accounts for related companies, including a related company named Atlantic Rock and Quarry. [21] Charges for monthly rentals were apparently put on the Powerplan account in the names of the related companies. Substantialpayments from Powerplan would then be deposited in Hickman Equipment’s accounts.

According to the accounts receivable clerk, therelated companies received special loan terms, which included an initial six-month interest and payment free period. A person from JohnDeere Credit began to inquire and expressed concern about the charges and the special terms. [22] The agreed statement of facts further indicates that at the behest of Mr. Hunt, the business manager at Hickman Equipmentcompleted rental contracts for four related companies. Mr. Hunt apparently provided the business manager with the details to draft therental agreements. The business manager prepared the contracts and gave them to Mr.

Hunt, who later returned with the signed forms. These related companies were billed through the Powerplan program. [23] The agreed statement of facts also referred to Mr. Hunt’s involvement in an exchange of emails in 2001 pertaining to the dealsconducted between Hickman Equipment and a related company and Power Plan. The agreed facts indicated that these emails confirmedMr. Hunt’s awareness of the financing arrangement between that related company (Atlantic Rock and Quarry) and John Deere(Powerplan). [24] The agreed statement of facts also indicates that in an email dated February 10, 2002, Mr.

Hunt conceded to the Chief FinancialOfficer of the Hickman Group of Companies “that equipment units were sold to the related companies and, further, that financecompanies put forth the purchase price on behalf of those companies” (paragraph 44 of the agreed statement of facts). [25] Further, as stated, the agreed statement of facts indicated that the President of the Hickman Group of Companies hadunderstood that the related companies had been created for the legitimate purpose of removing non-John Deere equipment from theinventory of Hickman Equipment.

However, according to the agreed statement of facts, Hickman Equipment was ostensibly renting asubstantial amount of equipment to the related companies; and such transactions would not remove the units from inventory. Further,

Hickman Equipment’s sales of equipment to those related companies were “soon reversed” (paragraph 54 of the agreed statement of facts). [ 26 ] Paragraph 55 of the agreed statement of facts indicated that it “is difficult to imagine that John Deere would have agreed to loan out large sums of money through its Powerplan program to finance equipment sales and rentals in these circumstances”. [ 27 ] As already stated, the agreed statement of facts also indicates that the management at Hickman Equipment misled John Deere into providing credit.

Further, at paragraph 56 of the agreed statement of facts, it is stated that Hickman Equipment conducted business with related companies in a manner which hid the true financial state of Hickman Equipment. [ 28 ] The Crown clarified in submissions that there were other activities at Hickman Equipment which may also have bolstered its books; however, Mr.

Hunt’s conviction relates only to his involvement in activities as described in the agreed statement of facts. [ 29 ] Paragraph 57 of the agreed statement of facts provides an example of the extent to which the transactions with related companies hid the true financial state of Hickman Equipment; and suggests that there is difficulty assessing the precise amount attributable to the fraud. This is stated, as follows: 57.

For instance, the transactions with ARQ and Labrador Aggregate and Mining Products Ltd. alone permitted H.E. to make entries in its accounting that improved its retained earnings by a profit of $2.6 million. The amount of monies involved in the fraud was therefore in the millions and certainly greater than $5000. As stated above, in 2001 the revenue recorded for these transactions was $25 094 463.00 in 2001.

These amounts may have made H.E. more attractive for potential creditors, but it is impossible to determine whether and to what extent financing companies might have loaned to H.E. based on the fake revenue from related companies. [ 30 ] Finally, the agreed statement of facts also indicates that the senior management at Hickman Equipment earned significant bonuses based on the net income of the company. Without the accounting mis-statements, the net income of Hickman Equipment would have been significantly reduced for the period 1994 to 2000, along with the bonuses. [ 31 ] In December 2003 Mr.

Hunt forwarded $800,000 to the Trustee as repayment of the bonuses he had received during his last several years at Hickman Equipment. Further, Hickman Equipment did eventually pay outstanding amounts owed to John Deere by the related companies under the Powerplan accounts. CIRCUMSTANCES OF THE OFFENDER [ 32 ] As stated, Mr. Hunt is 72 years of age. He is a widower, father and grandfather. [ 33 ] Mr. Hunt’s mental health deteriorated when he was charged in November of 2012. He sees a geriatric psychiatrist and takes medications for his mental health. Mr.

Hunt has also been diagnosed with a serious physical condition, and has been told by a doctor that because of that condition he now has a limited lifespan. [ 34 ] Mr. Hunt spent his entire lifesavings on legal fees associated with this matter, and he declared bankruptcy in 2016. [ 35 ] Mr. Hunt has no criminal record. MITIGATING AND AGGRAVATING CIRCUMSTANCES [ 36 ] The Crown and Defence Counsel agree that there are very unique and significant mitigating circumstances. I agree. [ 37 ] To begin with, as stated, Mr. Hunt’s advanced age of 72 years is a mitigating factor.

His poor health, with a limited life span, is also a very significant mitigating factor. [ 38 ] Mr. Hunt has no criminal record. Further, he entered a guilty plea prior to the commencement of a lengthy trial, which is currently scheduled for about three months duration, commencing in October. [ 39 ] Further, as submitted by the Crown, the very lengthy period of investigation in this case is a unique mitigating factor. The matter was brought to the attention of the RCMP in 2002; however, the investigation took an extremely long time, and charges were not laid until November of 2012.

As well, as submitted by Defence Counsel, the Crown’s witnesses may have difficulty at trial recalling events which took place 16 to 18 years ago. [ 40 ] Further, and as submitted by the Crown, there were no vulnerable victims in this case. Rather, the losses that may have occurred were to creditors who were corporations, banks and financial institutions. [ 41 ] The Crown also acknowledged that a further unique circumstance is that the offence was not committed to directly enrich Mr. Hunt; rather, the fraud appears to have been committed for the purpose of keeping Hickman Equipment afloat.

Having said that, it did impact Mr. Hunt’s bonuses. Nevertheless, in 2003 Mr. Hunt repaid $800,000 to the Trustee for bonuses. [ 42 ] Finally, Mr. Hunt’s offence involved placing substantial monies at risk. However, there was no actual loss to John Deere Limited under the Powerplan accounts, as the outstanding amounts were eventually paid by Hickman Equipment. [ 43 ] Aggravating circumstances include the diminishment of trust in the commercial loan industry. Further, based on the length of the investigation and the circumstances of the offence, the fraud appears to have been complex.

As well, the magnitude of the fraud appears to have been significant, and in excess of one million dollars. Although the Crown was unable to ascertain with certainty the precise amount involved, the agreed statement of facts indicates that the amount of monies involved in the fraud was millions.

RANGE OF SENTENCE [ 44 ] With respect to the range of sentence, neither Counsel submitted case law from our province. [ 45 ] The Crown submitted two Nova Scotia cases for the Court’s consideration; R. v. Colpitts , 2018 NSSC 180 , and R. v. Clarke , 2016 NSSC 101 . According to the Nova Scotia Court in R. v. Colpitts (at paragraph 111 ), the applicable sentencing range in Nova Scotia for large scale complex frauds is 3 to 6 years’ imprisonment.

The Crown suggested that is a fitting range under normal circumstances; however, the Crown conceded that the significant mitigating factors in this case justified a sentence of one year, which is below the suggested range. [ 46 ] Defence Counsel submitted the case R. v. Plange , 2018 ONSC 1657 , in which the Ontario Court noted that the range for large scale frauds is a term of imprisonment of 2 to 6 years. However, the Ontario Court further acknowledged that when conditional sentences were available for the offence of fraud, conditional sentences had been imposed, even for large scale frauds.

At paragraphs 57 and 58, the Ontario Court reviewed factors to consider when sentencing and then stated, as follows: 57 In assessing those factors, I am mindful of the range of sentences given for large scale frauds. Significant penitentiary terms of 2 to 6 years have been imposed: see Dobis; Bogart; R. v. Bertram , [1990] O.J. 2013 (C.A.) ; R. v. D'Andrea, [2004] O.J. No. 2330 (C.A.) ; R. v. Khan, 2002 BCCA 703 ; R. v. Pouchkina , 2016 ONCJ 384 ; R. v.

Diekmann, 2014 ONSC 717 . 58 Contra wise, when conditional sentences were available for this offence, conditional sentences in the upper reformatory range have also been imposed for large scale frauds: see Lamoreux (18 month conditional sentence where fraud was over $1 million); R. v. Underys , [1999] O.J. No. 4372 (C.A.) (18 month conditional sentence for a credit union manager who stole more than $1 million); R. v. Campbell , [2005] O.J. No. 4696 (C.J.) (2 years less a day conditional sentence for a lawyer where there was over $1 million losses to his clients); R. v.

Abedi, 2012 ONCJ 540 (2 years less a day conditional sentence for a large scale organized fraud on the Business Development Bank of Canada where the loss was $14 million); R. v. Loewen , [2002] M.J. No. 298 (2 years less a day conditional sentence for a bank fraud of $1.5 million dollars); R. v. Tulloch, [2002] O.J. No. 5446 (S.C.J.) ; (2 years less a day conditional sentence for conspiracy to defraud the government of $6.2 million); R. v. Massoudinia, [2002] O.J.

No. 5504 (S.C.J.) ; (2 years less a day conditional sentence for modeling agency fraud of $2 million with many victims). [ 47 ] Further, with respect to conditional sentences in fraud cases, the Ontario Court stated at paragraph 59, as follows: 59 I also note that the conditional sentences imposed in these cases should be viewed through the lens that often conditional sentences are longer than if true incarceration is imposed: R. v. R.N.S. , 2000 SCC 7 , [2000] 1 S.C.R. 149 ; R. v. Killam, [1999] O.J. No. 4829 (C.A.) ; R. v.

Shoker , 2006 SCC 44 , [2006] 2 S.C.R. 399 . [ 48 ] In the case before me, Counsel both agreed to a conditional sentence order for a period of one year. Under the current provisions of the Code ( section 380(1.1) ) , a mandatory period of imprisonment of two years would be imposed because the amount of the fraud was in excess of one million dollars. However, as submitted by Counsel, a mandatory minimum term of imprisonment for large scale fraud in excess of one million dollars was not in effect at the time that Mr. Hunt’s offence was committed. Therefore, Mr.

Hunt is entitled to the benefit of this lesser punishment in accordance with

section 11(

i) of the Canadian Charter of Rights and Freedoms ,

section 11,

part 1 of the Constitution Act , 1982, being

schedule D to the Canada Act, 1982 (UK), 1982, c. 11, which states: 11. Any person charged with an offence has the right … (

i) if found guilty of the offence and if the punishment for the offence has been varied between the time of commission and the time of sentencing, to the benefit of the lesser punishment. [ 49 ] As a result, a mandatory minimum punishment does not apply to Mr. Hunt. Further, as submitted by Counsel, at the time the offence was committed by Mr. Hunt, conditional sentences were available for the offence of fraud over one million dollars; therefore a conditional sentence can be considered in the circumstances of this case. [ 50 ] To elaborate on this point, Defence Counsel referred the Court to the Supreme Court of Canada decision in R. v. Proulx , 2000 SCC 5 , which indicates that

section 742.1 of the Code , as it was at the time Mr. Hunt committed the offence, permits consideration of a conditional sentence when there is no minimum term of imprisonment.

Section 742.1 stated then, as follows: 742.1 Where a person is convicted of an offence, except an offence that is punishable by a minimum term of imprisonment, and the court (

a) imposes a sentence of imprisonment of less than two years, and (

b) is satisfied that serving the sentence in the community would not endanger the safety of the community and would be consistent with the fundamental purpose and principles of sentencing set out in sections 718 to 718.2,

the court may, for the purpose of supervising the offender's behaviour in the community, order that the offender serve the sentence in the community, subject to the offender's complying with the conditions of a conditional sentence order made under

section 742.3. [ 51 ]

Section 742.1 has since been amended; but the form applicable to this case is as it was above. [ 52 ] At paragraph 79 of R. v. Proulx , the Supreme Court of Canada stated, as follows: 79

Section 742.1 does not exclude any offences from the conditional sentencing regime except those with a minimum term of imprisonment. Parliament could have easily excluded specific offences in addition to those with a mandatory minimum term of imprisonment but chose not to. As Rosenberg J.A. held in Wismayer , supra, at p. 31: Parliament clearly envisaged that a conditional sentence would be available even in cases of crimes of violence that are not punishable by a minimum term of imprisonment.

Thus, s. 742.2 requires the court, before imposing a conditional sentence, to consider whether a firearms prohibition under s. 100 of the Criminal Code is applicable. Such orders may only be imposed for indictable offences having a maximum sentence of ten years or more "in the commission of which violence against a person is used, threatened, or attempted" (s. 100(1)) and for certain weapons and drug offences (s. 100(2)).

Thus, a conditional sentence is available in principle for all offences in which the statutory prerequisites are satisfied. [ 53 ] I have already indicated that there was no minimum term of imprisonment for Mr. Hunt’s offence at the time it was committed. Therefore I am satisfied that the Court may consider imposing a conditional sentence in Mr. Hunt’s case, provided that the conditions of

section 742.1 (

a) and (

b) are met. [ 54 ] Further, in addition to considering the principles of sentencing under

section 718.1 and 718.2 of the Code , the Court must also consider the purpose of sentencing under

section 718 of the Code . To that end, I consider denunciation and deterrence to be of primary importance in the circumstances of this case. On this point I again refer to R. v. Proulx in which, at paragraph 127 , the Supreme Court of Canada indicated that “a conditional sentence can provide significant denunciation and deterrence”. [ 55 ] Defence Counsel submitted that a conditional sentence of one year falls within the range of sentence, particularly when considering the cases cited at paragraph 58 of R. v.

Plange . [ 56 ] I am of the view that the case law submitted indicates that the range of sentencing in commercial fraud cases of a large magnitude, as is the case here, generally leads to the imposition of a term of imprisonment greater than a year, and usually fall within the range of a term of imprisonment from 2 to 6 years. Nevertheless, as recognized by the Ontario Court in R. v. Plange , conditional sentences of less than 2 years had been imposed in large scale fraud cases (see paragraph 58 of R. v. Plange ) . Mr.

Hunt’s offence is large scale as it involved monies in excess of a million dollars. [ 57 ] Having said this, based on the foregoing analysis, and after considering the facts, cases and submissions, I agree with the Crown that there are very significant and unique mitigating factors in this case which justify imposing a sentence below range. The mitigating factors heavily outweigh the aggravating factors. Indeed the outweighing is to the extent of allowing this case to be classified as unique, and such permits the Court to be satisfied with the joint submission of a one year sentence.

Further, I am satisfied that Mr. Hunt serving his sentence in the community will not endanger the safety of the community. [ 58 ] In conclusion, I have considered the principles and purpose of sentencing, particularly deterrence and denunciation, along with the circumstances of the offences, the circumstances of the Offender, the mitigating and aggravating factors, the submissions of counsel, the case law, including the case law pertaining to joint submissions.

As a result, I find that the one year conditional sentence submitted by both Counsel would not “bring the administration of justice into disrepute or is otherwise contrary to the public interest” (at paragraph 32, R. v. Anthony-Cook ). DISPOSITION [ 59 ] Mr. Hunt, I impose upon you a sentence of imprisonment of one year, to be served in the community, under the terms of a conditional sentence order. [ 60 ] You shall serve the sentence in the community subject to the following conditions: 1. Keep the peace and be of good behaviour; 2. Appear before the Court when required to do so by the Court; 3.

Report to a supervisor at Adult Corrections within the next two days, and as required and in the manner directed by the supervisor, or someone acting in his/her stead; 4. Remain within the Province of Newfoundland and Labrador unless written permission to go outside the Province is obtained from the supervisor; 5. Notify the supervisor in advance of any change of address;

6. Remain within your residence, or on the property adjacent thereto, during the period of conditional sentence, except for the following: i. Attendance for medical, or dental treatment, or stay in a hospital required under medical advice; ii. One hour per day outside your residence for exercise activities. This will be daily from 9 A.M. to 10 A.M., or such other timeframe as approved by the supervisor; iii. Up to four consecutive hours per week, for the purpose of shopping, banking, or doing errands. This will be from noon to 4 P.M. on Saturdays, or such other timeframe as approved by the supervisor; iv.

To vote in municipal, provincial or federal elections; and v. For attendance for such further and other purposes and times as approved by your supervisor. [ 61 ] Order accordingly. _____________________________ Valerie L. Marshall Justice