R. v. Pacific Gateway Holding Inc., 2021 BCPC 37

Citation: R. v. Pacific Gateway Holding Inc. 2021 BCPC 37 Date: 20210303 File No: 255019-1 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA (Criminal Court) REGINA v. PACIFIC GATEWAY HOLDING INC. REASONS FOR SENTENCE OF THE HONOURABLE JUDGE R. HARRIS Counsel for the Crown: C. Hough and A. Hathorn Counsel for the Defendant: R. Clark, QC Place of Hearing: Vancouver , B.C.

Dates of Hearing: October 26, December 7, 2020; January 18, 2021 Date of Judgment: March 3, 2021 INTRODUCTION [ 1 ] Pacific Gateway Holding Inc., (Pacific) has pled guilty to two counts of illegally importing European eels contrary to the Wild Animal and Plant Protection and Regulation of International and Interprovincial Trace Act , S.C. 1992, c. 52 ( WAPRIITA ). This Court is tasked with the following: imposing penalties, identifying the profits gained and determining how Pacific is to notify their shareholders.

EUROPEAN EELS [ 2 ] European eels occupy a natural habitat in the waters of Europe and in the Mediterranean. They are a keystone species and they assist in maintaining a balanced aquatic ecology. Overtime, European eel stocks have declined and they have been declared a Critically Endangered Species. In response to this declaration, European eels were listed in Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora ( CITES ).

As a consequence of this listing, and pursuant to the WAPPRII , European eels cannot be lawfully imported into Canada without the exporting nation issuing a CITES permit. [ 3 ] European eels present no greater economic benefit for Canadian importers and sellers. Notably, European eels are not coveted; they are not rare, nor are they a delicacy. Rather, European eels simply become co-mingled with other species during harvesting, preparing, packaging and shipping. In fact, unless informed, the consumer of an European eel would not be able to distinguish it from another type of eel.

THE COMPANIES [ 4 ] Investigation into Gateway revealed that the Director, Xe He, and his family, hold interests in several companies involved in the import and export of eels and other seafood. In this regard, members of the He family are chairpersons, directors and/or shareholders of related national and international companies. [ 5 ] Xe He is the director of Sea World (the company that purchased the first shipment of eels from Pacific) and World Fresh Seafood Ltd. These companies occupy the same warehouse space as Pacific and it appears that persons working in the warehouse are working for both companies.

Interestingly, Pacific’s financial records, do not reference any employee related expenses. [ 6 ] The structuring of the companies and their location suggests that Pacific is a shell company whose sole purpose is importing of eels. According to the Crown, the connections between the companies makes it difficult to determine what revenues were generated by particular sales. [ 7 ] As for Pacific’s financial circumstances, in 2017, their net income was $48,374 with their liabilities exceeding their assets by $42,599.

In 2018, Pacific’s net income, was a loss of $262,052 with their liabilities exceeding their assets by $236,747. CIRCUMSTANCES OF THE OFFENCES Count 1 [ 8 ] In the fall of 2017, Pacific purchased and imported a shipment of eels from a company located in the People’s Republic of China. On October 17, 2017, authorities from Environment Canada inspected the shipment and noted that it was identified as Japanese eels with a declared value of $409,968. Inside the shipment were 2,100 boxes of frozen roasted eel fillets, each box contained sealed packages of fillets ranging in weight from 7 ounces to 14 ounces.

The total weight of the shipment was 21,000 kilograms. [ 9 ] Ninety random samples were selected from the sealed packages and submitted for DNA testing. The testing revealed that 48% of the shipment contained European eels with the remainder being American eels. No Japanese eels were detected. Notably, Pacific did not have a CITES permit for the importation of the European eels that were found. [ 10 ] Prior to receiving the DNA results, the authorities released the shipment to Pacific Gateway, who then sold the shipment to Sea World for $411,600.00.

Sea World then sold the shipment to retailers resulting in a gross revenue of $54,732.00. Count 2 [ 11 ] On January 31, 2018, the Canadian authorities inspected a second shipment of eels imported. These eels were also purchased from a Chinese company. This shipment also contained 21,000 kilograms of eels and they were packaged in a manner similar to the October shipment. One hundred and five random samples were obtained and submitted for DNA testing which revealed that 39% of the shipment contained European eels. This shipment was retained by the authorities.

SENTENCING POSITIONS [ 12 ] The parties agree that Pacific is a small revenue corporation and according to s. 22 (4) (b)(i), WAPPRITA they are subject to a sentence on each count ranging from a minimum of $25,000 to a maximum $2,000,000. The Crown [ 13 ] The Crown urges the Court to impose a $300,000 fine for count 1, with this amount including the profits gained from the sale of the shipment; and a $200,000 fine for count 2.

In support, the Crown points to the following aggravating factors; the indirect risk to the European eel stocks, the recklessness displayed by Gateway, the offences were committed with the intention of profiting and the offences involved a high degree of planning. The Crown argues that the fines will denounce the unlawful trade of protected animals, make the conduct unprofitable and deter others. The Crown relies on the following authorities: R. v. Terroco Industries Limited, 2005 ABCA 141 , R. v. Brown, 2010 BCCA 225 , R. v. The Lake Louse Ski Area Ltd, 2020 ABQB 422 , R. v.

Wan, 2019 BCPC Surrey 228648- 1 May 6, 2019, R. v. Anderson, 2016 BCPC 372 , R. v. Datacom Marketing Inc., 2009 CarswellOnt 17176 . The Defence [ 14 ] The defence urges the Court to impose the mandatory minimum of $25,000 per count. In support the defence argues that Pacific’s conduct fell just short of meeting the due diligence requirements, that little to no money was made, that the amount of European eels involved did not jeopardize existing stocks, that guilty pleas were entered, and that Pacific stopped importing eels.

Pacific also points out that they are a small company and they have already lost over $900,000 by virtue of other shipments being seized. The

defence relies on the following authorities: R. v. Alsager, 2011 SKPC 184, R. v. Canadian Tire Corporation Limited, (ONSC), R. v. Clemett, 2016 ABPC 248, R. v. Deslisle, 2003 BCCA 196, R. v. Ensor, 2017 YKTC, R. v. Maynes, 2010 BCPC 353, R. v.Terroco Industries Limited, 2005 ABCA 141, R. v. Envirogun Lid. and Kimery, 2019 SKQB 89, R. v. Marsland, 2012 SKCA 47, R. v.Nordstrom, 2014 SKCA 124. THE LAW [15] With the exception of Wan, none of the cases cited by counsel involves sentencing for offences against WAPRIITA.

Nevertheless,the cases are of assistance in that they provide factors to consider when imposing a sentence for environmental offences. [16] From the authorities cited, I recognize that environmental protection is a core value of Canadian society. I also recognize that anypenalty imposed must deter and that any fine must be substantial enough to warn others and not appear to be a licencing fee for illegalactivity: (Terroco at para. 60). Further, that when dealing with a small corporation of limited means deterrence is achieved at a lessercost: (Terroco at para. 58).

Additionally, when sentencing a corporate offender a court should be aware of the offender’s general abilityto pay and any sentence imposed should not result in economic inviability, however, as stated in Terroco, the penalty must be more thana slap on the wrist but less than a fatal blow. [At para. 60.] WAPRIITA and PENALTIES [17] As for the appropriate penalty, WAPRIITA contains several relevant sections. [18] Section 22 (4) (b) (ii) establishes that the penalty for the first offence for a small revenue corporation is a minimum fine of$25,000 and a maximum of $2,000,000. [19] As for what constitutes a second offence, s. 22.03 makes it a second offence only if the court is satisfied that the offender haspreviously been convicted.

Pacific has never been convicted of an offence related to WAPRIITA, therefore, and without any previousconvictions, I am obligated to treat each count as though Pacific was a first time offender. Additional fine [20] In addition to any fine imposed, s. 22.4 requires me to impose an additional fine that is equal to the estimated value of anyproperty, benefit or advantage that Pacific may have gained. In this case, it would be the revenue that was gained from the retail sale ofthe first shipment.

Notice to shareholders [21] Pursuant to s. 22.5, I must make an order directing that Pacific notify their shareholders of the facts relating to the offence and thepunishment imposed. Fundamental purpose of sentencing [22]

Section 22.07 sets out the fundamental purpose of sentencing and it states: 22.07 The fundamental purpose of sentencing for offences under this Act is to contribute, in light of the numerous serious threats toplants and animals and their importance to the environment, to respect for the law regulating international and interprovincial trade inanimals and plants through the imposition of just sanctions that have as their objectives (

a) to deter the offender and any other person from committing offences under this Act; (

b) to denounce the unlawful trade in certain animals and plants and to make it unprofitable; and (

c) to recover, if possible, certain species of animals and plants unlawfully traded. [23]

Section 22.08 sets out the sentencing principles and it states: Sentencing principles 22.08

(1) In addition to the principles and factors that the court is otherwise required to consider, including those set out in sections 718.1to 718.21 of the Criminal Code, the court shall consider the following principles when sentencing a person who is convicted of anoffence under this Act: (

a) the amount of the fine should be increased to account for every aggravating factor associated with the offence, including theaggravating factors set out in subsection (2); and (

b) the amount of the fine should reflect the gravity of each aggravating factor associated with the offence. Aggravating factors

(2) The aggravating factors are the following: (

a) the offence caused damage or risk of damage, directly or indirectly, to animals or plants; (

b) the offence caused damage or risk of damage to a unique, rare, particularly important or vulnerable species of animal or plant orpopulation of animals or plants;

(

c) the offender committed the offence intentionally or recklessly; (

d) the offender profited, or intended to profit, by committing the offence; (

e) the offender has a history of non-compliance with federal or provincial legislation that relates to environmental or wildlife conservation or protection; and (

f) the offence involved a high degree of planning. Absence of aggravating factor

(3) The absence of an aggravating factor set out in subsection (2) is not a mitigating factor. Meaning of damage

(4) For the purposes of paragraphs (2)(

a) and (b), damage includes loss of use value and non-use value. Reasons

(5) If the court is satisfied of the existence of one or more of the aggravating factors set out in subsection (2) but decides not to increase the amount of the fine because of that factor, the court shall give reasons for that decision. Sections 718.1 to 718.21 of the Criminal Code [ 24 ] Pursuant to s. 718.1 , a fundamental principle of sentencing is proportionality.

As such, the sentence imposed must be proportionate to the seriousness of Pacific’s offences and their degree of responsibility. [ 25 ] Further, and relevant to the instant matter, is s. 718.2 (a) , whereby a court should increase or reduce a sentence on the account of any aggravating or mitigating circumstances. [ 26 ] Lastly, and of importance, is s. 718.21 which lists factors that a court shall consider when imposing a sentence on an organization. The following subsections are relevant: 718.21 A court that imposes a sentence on an organization shall also take into consideration the following factors: (

a) any advantage realized by the organization as a result of the offence; (

b) the degree of planning involved in carrying out the offence and the duration and complexity of the offence; (

c) whether the organization has attempted to conceal its assets, or convert them, in order to show that it is not able to pay a fine or make restitution; (

d) the impact that the sentence would have on the economic viability of the organization and the continued employment of its employees; (

e) the cost to public authorities of the investigation and prosecution of the offence; (

f) any regulatory penalty imposed on the organization or one of its representatives in respect of the conduct that formed the basis of the offence; (

g) whether the organization was — or any of its representatives who were involved in the commission of the offence were — convicted of a similar offence or sanctioned by a regulatory body for similar conduct; (

h) any penalty imposed by the organization on a representative for their role in the commission of the offence; (

i) any restitution that the organization is ordered to make or any amount that the organization has paid to a victim of the offence; and (

j) any measures that the organization has taken to reduce the likelihood of it committing a subsequent offence. ANALYSIS [ 27 ] In determining an appropriate penalty, I start by considering the aggravating factors found in s. 22.08 (2) of WAPRIITA . Aggravating factors (

a) Damage caused or risk of damage [ 28 ] The Crown’s expert, Florian Stein, confirms that the quantity of European eels found in shipments 1 and 2 will not have a detrimental effect on the stock. Despite this, the Crown argues that the importation of eels from China creates a risk to the European eel stocks.

The Crown attributes the risk to China being unable to fulfill the world demand for eels, as such, and in order to meet the demand, China accepts all eels, including baby European eels, the result becoming that when one imports eels from China there is a risk that European eels will be mixed with an otherwise legitimate shipment.

As such, purchasing eels from China without performing the necessary due diligence creates the risk that legitimate shipments are tainted and therefore ultimately placing the European eel stocks at risk. [ 29 ] In response, counsel for Pacific argues that the amount of eels ordered by Pacific were negligible to the world demand. As such,

Pacific’s small orders had no impact on China’s ability to meet the world demand, thus, Pacific’s orders did not require that Chineseproducers seek out baby European eels, nor, was there a measurable chance they would be mixed in. [30] I am satisfied that the quantity of European eels imported by Pacific did not detrimentally affect the existing stocks.

As for thepotential of harm, I am satisfied that the world demand creates the potential that purchase orders from China are being met, in part, byproduction methods involving the addition and growth of illegally obtained baby European eels, which notably involves other illegalactivities such as the harvesting, the smuggling and the trafficking of European eels.

As such, and without the necessary precautions, anyorder has a risk that it is contaminated and therefore creates a list of damage to European eel stocks. [31] With the above in mind, I find that Pacific’s relatively small orders created some distant risk to European eel stocks. (

b) The risk was caused to a unique, rare particularly important or vulnerable species. [32] The Crown argues, and it is not challenged, that European eels are rare because they are an endangered species. They also arguethat overharvesting has resulted in European eels becoming vulnerable and they are important because they are a keystone species in thatthey help maintain a balanced aquatic ecology. (

c) The offender committed the offence intentionally or recklessly. [33] The Crown argues that Pacific’s conduct amounts to a high degree of recklessness and not a near miss. In support, the Crownpoints out that Pacific was operating in a highly regulated industry and that they had associations with other related companies that had10 years of importing experience, as such, the Crown argues it was reckless of Pacific in failing to educate themselves or take steps tolearn about restrictions on the importation of eels generally.

The Crown points out that the importation of food is highly regulated and ata minimum one would be expected to educate themselves about the regulations and requirements associated with importing any fooditem and that failure to do so is reckless. [34] Counsel for Pacific argues that their conduct amounts to a near miss. In support, counsel points out that Pacific was not intendingto import European eels, rather, they were importing Japanese eels and that European eels became mixed with the shipment.

Counselsubmits that Pacific did not know that there was a risk of the shipment being contaminated with European eels. Finally, counsel pointsout that Pacific did not know that European eels were prohibited in Canada.

According to counsel this lack of knowledge wascommonplace and in support, counsel references comments by Alain Gauthier, Wildlife Officer of Environment and Climate ChangeCanada made during the interview of Xin He. [35] In considering the issue of culpability, I find Justice Macleod’s comments at paragraphs 35 – 37 of Terroco, to be instructive: [35] Culpability should be a dominant factor in sentencing for environmental offences. The EPEA provides that the maximumsentence for intentional acts is twice that for unintentional acts.

On some occasions the Crown will come close to establishing that therelease was intentional. Conversely, there are acts which cause harm despite the exercise of due diligence which provides an absolutedefence. In between these two extremes are a myriad of circumstances ranging from cases of recklessness to those where the defence ofdue diligence failed but the evidence showed a near miss. It is evident that offences which involve recklessness will call for more severepenalties than those which are near due diligence misses.

The degree of carelessness is a factor in sentencing for environmental offences.Due diligence in sentencing for environmental offences is to be assessed on a sliding scale: the more diligent the offender, the lower therange of fit sentences; alternatively, the less diligent the offender, the higher the range of fit sentence. [36] In determining the degree of culpability, the failure to take simple and inexpensive steps to avoid the unwanted consequenceprior to the contamination is an aggravating factor: Van Waters & Rogers. Reasonable foreseeability impacts the sentence.

If the dangeris obvious rather than obscure, the failure to take reasonable care demonstrates a higher level of culpability and is an aggravatingfactor: R. v. Canadian MDF Products Co. (2002), 316 A.R. 228, 2002 ABPC 82; R. v. Rio Algom Ltd. (1988), (ONCA), 66 O.R. (2d) 674 (C.A.); R. v. Fiesta Party Rentals

(1984) Ltd., [2000] A.J. No. 1679, 2000 ABPC 218, aff’d 2001 CarswellAlta1817 (Q.B.). [37] The degree of culpability must be determined by virtue of a rigorous assessment of what actually occurred. Sentencing judgesshould critically examine the facts and attempt to place the offender at an appropriate point on the sliding scale of culpability rangingfrom offences where due diligence was a near miss to those where the Crown’s ability to establish intent to release is a near miss.

Oncethat point is determined it becomes an important factor in the determination of a fit sentence. [36] In terms of culpability, I find that Pacific’s culpability for the first shipment is between reckless and an almost miss. This isbecause, it is reasonable that an importer in like Pacific would have taken some steps to make enquires and educate themselves about therisks associated with importing eels; specifically, the risk that of shipments from China are being contaminated and thereafter implementstrategies to reduce the risk of contamination.

Having said this, the degree of inquiry is driven by the foreseeability of the risk and thedegree of harm that would occur if the risk materialized.

In other words, the more obvious the risk and the greater potential for harm, themore intensive the inquiries, and failure to do so brings one closer to reckless. [37] Applying the above, and despite Pacific failing to make reasonable inquiries, I find that the minimal risk of harm combined withlittle information regarding eel shipments from China being tainted with European eels is what moves Pacific’s conduct downward fromrecklessness and toward a near miss. [38] As for the second shipment, I am satisfied that Pacific’s conduct was not reckless, nor, was it a near miss.

In this regard, Pacificwas aware on December 7, 2017, that there were concerns regarding European eels being mixed with eel shipments and in response,Pacific contacted their exporter and cautioned them against mixing European eels in their shipments. In my view, this fell short of a clearmiss because Pacific did not confirm what steps the exporter was going to take in order to safeguard against European eels making theirway into the shipments. Simply, relying on the exporter’s verbal assurances was a start but not sufficient. (

d) Pacific profited or intended to profit by committing the offence.

[ 39 ] Pacific is a corporate enterprise and their motive in importing eels was to make a profit, despite this, I cannot conclude that Pacific committed the offences because they intended to profit from European eels specifically. This is because the evidence demonstrates that there is no economic benefit associated with importing European eels, thus, it cannot be said that Pacific wanted European eels because of a potential for greater profit. (

e) History of non-compliance [ 40 ] Pacific has no history of non-compliance with environmental or wildlife regulations. (

f) Degree of planning [ 41 ] The Crown argues the offence involved a high degree of planning. In this regard, the Crown underscores that Pacific was involved in a commercial operation which necessarily involved planning for the following activities; sourcing of the eels, financing, shipping, receiving and selling. [ 42 ] In my view, it would be misguided to hold that planning in the context is an aggravating factor. The planning in the instant case did not operate to intentionally commit the offences. Specifically, there was no plan to obtain European eels, nor, was there a plan to subvert authorities.

The plan was to lawfully import frozen eels into Canada and to re-sell them to retail outlets. Simply, I cannot conclude that there was a plan to act illegally. Accordingly, I decline to see the planning of the legitimate corporate activity to be aggravating. Criminal Code considerations [ 43 ] I now turn to the considerations required by ss. 718.2 -718.21 of the Code. [ 44 ] As for proportionality. I find the seriousness of the offences to be at the lower end of the spectrum.

In support, I note, the actual harm and the potential for harm was at the low end. [ 45 ] As for the mitigating factors, I find Pacific’s guilty plea to be substantially mitigating. The plea has saved the Crown the time and expense associated with what would have been a lengthy trial. Specifically, the trial would have consumed a number of weeks, involved expert testimony and accommodations for international witnesses.

In addition to saving time, the plea is an expression of remorse and a waiver of Pacific’s right to have the Crown prove the case beyond a reasonable doubt. [ 46 ] As for the factors unique to s. 718.21, the Crown seeks recovery of the costs associated with the DNA tests. In this regard, 7 shipments were tested at a total cost of $83,216.

In considering the amount that should be recovered, I observe that Pacific has admitted liability in relation to 2 shipments, it therefore stands to reason that Pacific’s obligation should be limited to the testing of 2 shipments which is $23,776. [ 47 ] In terms of steps that Pacific has taken to avoid the likelihood of further offences, when Pacific first became aware that their shipments were contaminated with European eels, they notified the exporter in hope that the exporter would exercise greater caution.

Despite this notification, Pacific still experienced problems with the shipments and in response they coordinated the mid voyage return of a shipment. Thereafter, and owning to their inability to stop the mixing of European eels, Pacific stopped importing eels altogether. PENALTY [ 48 ] In considering an appropriate penalty, I recognize that the fine imposed must denounce and deter. It must be meaningful and not simply a cost of doing business. I also appreciate that the penalty must be proportionate and it must not be crushing to the viability of Pacific.

In all of the circumstances, I recognize that the European eel stocks were not harmed and that the risk of harm was slight. Further, Pacific’s culpability was medium to low on the spectrum, and that a profit was achieved from the sale of the first shipment. [ 49 ] I decline to impose the fines recommended by the Crown. In my view, the suggested fines are disproportionate and they do not recognize the deterrent effect of the losses incurred by virtue of the seizures that do not form part of the sentencing.

Finally, the fines sought would misrepresent the weight given to the aggravating factors and fail to recognize the mitigating factors. [ 50 ] As for the fines proposed by Pacific, they do not adequately denounce in that they would not adequately communicate societal abhorrence for the environmental offences committed. In my view, a fine in the amount of $50,000 for count 1, plus $40,000 for the profit gained for a total fine of $90,000 achieves this objective while deterring others.

For count 2, there will be a $50,000 fine, plus the costs associated with the DNA testing, which is $23,776. [ 51 ] As for the $40,000 profit, this figure is rounded down from the gross revenue received from the first shipment. I have declined to proportion the revenue to the percentage of European eels detected in the shipment. This is because I see deterrence being enhanced if importers run the risk of losing the financial benefit of the entire shipment.

Simply, the risk of losing profits from the entire shipment will motivate importers to exercise the necessary due diligence. [ 52 ] As for the claim of a reduction based on 48% of the 1/7 th of Sea World’s operating expenses for the eel division, I have similarly declined to reduce this amount.

In my view, to reduce the amount would dilute the deterrent impact of the penalty imposed and it would ultimately result in circumstances where future sentencing hearings would be hijacked with microscopic reviews of financial records and claimed expenses. [ 53 ] Turning to the 7% duty ($28,697.76) owing, I acknowledge that Pacific has placed monies in their counsel’s trust account with instructions that the duty be paid when an assessment is issued, nevertheless, I decline to reduce the revenue by the duty owing.

My reasoning is, there are no assurance that Pacific’s instructions regarding payment will not change. Moreover, I have generally considered the duty owing in determining an appropriate penalty.

NOTIFICATION OF SHAREHOLDERS [ 54 ] Within 30 days of Pacific’s counsel receiving a copy of these reasons, Pacific is to deliver a copy of these reasons to all of their shareholders. CONCLUSIONS [ 55 ] On count 1, Pacific is to pay $90,000 and on count 2, Pacific is to pay $73,776. Finally, Pacific is to provide a copy of these reasons as set out above to their shareholders. ____________________________ The Honourable Judge R. Harris Provincial Court of British Columbia