R v Dyck, 2018 MBCA 33

Citation: R v Dyck, 2018 MBCA 33 Date: 20180405 Docket: AR17-30-08755 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Holly C. Beard Madam Justice Diana M. Cameron Madam Justice Janice L. leMaistre BETWEEN : her majesty the queen ) J. C. Prober and ) B. T. King ) for the Appellant Respondent ) ) M. V. P. Cornick - and - ) for the Respondent ) Jeff dyck ) Appeal heard: ) November 22, 2017 ) (Accused) Appellant ) Judgment delivered: ) April 5, 2018 BEARD JA I. THE ISSUES [ 1 ] The accused is appealing his sentence on two counts of tax evasion, one under section 239(1) (

d) of the Income Tax Act , RSC, 1985, c 1 (5th Supp), related to $2,200,000 in unpaid income tax and the other under section 327(1) (

c) of the Excise Tax Act , RSC, 1985, c E-15, related to $166,367 in unremitted goods and services tax (GST). The offences arise from a scheme to market fraudulent tax write-offs as a form of alternative investments. Leave to appeal the sentence was granted earlier. [ 2 ] The accused’s grounds of appeal can be categorized as follows: (

i) did the sentencing judge err in his weighing of evidence, sentencing factors and circumstances; (ii) did the sentencing judge err by imposing a sentence that was unfit and unduly harsh; and (iii) was the accused prejudiced as a result of being represented by the same lawyer as his co-accused. [ 3 ] While the Crown did not file a cross appeal, in its factum it raises three errors on the part of the sentencing judge that it argues should be corrected: (

i) the fines imposed of $1,000,000 under the Income Tax Act and $88,183.50 under the Excise Tax Act do not comply with section 239(2) of the Income Tax Act and section 327(2) (

a) of the Excise Tax Act , both of which impose a mandatory minimum fine of 100 per cent of the amount of tax that was sought to be evaded – in this case, a total of $2,366,367, so the total of the two fines should be increased to that amount; (ii) the victim surcharge provisions in

section 737 of the Criminal Code do not apply to offences under the Income Tax Act or the Excise Tax Act , so a victim surcharge should not have been imposed; and (iii) the sentencing judge did not offer the accused time to pay the fine before ordering that the fine be payable immediately. II. THE FACTS

[ 4 ] The accused and a co-accused each pled guilty to one count of tax evasion and one count of unremitted GST, which took place between August 30, 2007 and July 31, 2010. Each received the same sentence of three years’ incarceration concurrent on each count, a fine of $1,000,000 for the tax evasion and $88,183.50 for the unremitted GST. The sentencing judge ordered that the fines be paid immediately and, in default, that each serve one additional year of incarceration, consecutive to the three years’ incarceration. The co-accused has not appealed his sentence.

The accused is represented by different counsel for this appeal than he had for the earlier proceedings. [ 5 ] There is no dispute as to the underlying facts. The accused was the president and sole shareholder of a company that he incorporated called One World United Inc. (One World). He promoted and oversaw the implementation and day-to-day activities of One World, which included the banking and accounting.

One World was marketed as offering consumers an opportunity to purchase a membership for a fee, which membership would provide the consumer with access to money-saving opportunities on a number of different products and services, much like a company loyalty program. It was sold as being similar to Costco. The co-accused was described as One World’s main sales agent. [ 6 ] To fund the business, the accused and the co-accused solicited loans from contributors, who received invoices for fictitious business losses equal to four times the amount of their contribution.

These invoices were used by the contributors to claim immediate deductions on their personal income tax returns and also GST refunds. Tax receipts for losses totalling $22,300,000 were issued, $14,500,000 of which were fictitious and had not been incurred by the contributors. The scheme was operating over a period of three years. As noted earlier, taxes totalling $2,200,000 were evaded and GST totalling $166,367 was unremitted. There were 325 contributors to the scheme, each of whom was audited by the Canada Revenue Agency (the CRA) and had their taxes reassessed.

Most of the evaded taxes were recovered with interest from the contributors by the CRA through the civil process, with the result that they each suffered losses arising from these investments. It is estimated the CRA expended 5,600 hours to complete the audit and investigation of the scheme, which does not include the time and cost of the audits of the individual contributors. [ 7 ] The accused and the co-accused each received a personal benefit of approximately $1,000,000 from the scheme.

The balance of the funds was funnelled through One World and into several other business schemes being operated by the accused, all of which failed. The accused has declared bankruptcy and the co-accused has lost everything, with the result that neither has any funds to pay any of the taxes or fines or to compensate the contributors for their losses. [ 8 ] The accused was 41 years old at the time of his sentencing and was married with two young children. He had no criminal record and provided 19 letters of reference and support (letters of support).

Post-arrest, he moved to the United States and began another investment business with a model similar to One World. The co-accused was 65 years old at the time of his sentencing and was married with children and grandchildren. He also provided a number of letters of support. While he had been an investment advisor for most of his life, he had been working at manual labour jobs since the failure of this scheme. Both accused provided statements to the court declaring their individual remorse and embarrassment for this matter and promising to repay the contributors.

While they attempted to raise the money to pay the fines prior to being sentenced, they were unsuccessful, and, other than a small payment by One World, the amount remains unpaid. [ 9 ] Counsel for the accused stated at the appeal hearing, as an additional mitigating fact, that the accused and his wife had just separated and he had sole care of their two children. I will deal with this information later. III.

STANDARD OF REVIEW [ 10 ] On several recent occasions, the Supreme Court of Canada has emphasized the high standard for reviewing a sentence, one of its most recent admonitions being in R v Lacasse , 2015 SCC 64 . Mainella JA, for this Court, explained that standard as follows in R v Houle , 2016 MBCA 121 (at para 11 ): The law affords a sentencing judge great latitude in tailoring a sentence to the offence and the offender ( R v Ipeelee , 2012 SCC 13 at para 38 , [2012] 1 SCR 433 ; and R v Nasogaluak , 2010 SCC 6 at paras 43-46 , [2010] 1 SCR 206 ).

Accordingly, the threshold for appellate intervention with a sentence is “very high” and limited only to situations of material error or where the sentence is demonstrably unfit (section 687(1) of the Code and R v Lacasse , 2015 SCC 64 at para 52 , [2015] 3 SCR 1089 ). A material error has two qualities beginning with demonstration of an error in principle, such as an error in law, a failure to consider or give sufficient weight to a relevant factor, consideration of an irrelevant factor or an overemphasis of an appropriate factor.

The second aspect is that the error must have impacted the sentence in more than just an incidental way ( see Lacasse at para 44 ). Where the error is harmless, as it has “no real effect” on the sentence, appellate intervention is not permitted ( Lacasse at para 45 ).

A sentence will be demonstrably unfit where it unreasonably departs from the principle of proportionality taking into account the individual circumstances of the offence and the offender and the acceptable range of sentence for similar offences committed in similar circumstances ( see Lacasse at paras 52-55 ; and R v Ruizfuentes (HS) , 2010 MBCA 90 at para 7 , 258 ManR (2d) 220 ). [ 11 ] As Wagner J (as he then was) stated for the majority in Lacasse , “demonstrably unfit” means “‘clearly unreasonable’, ‘clearly or manifestly excessive’, ‘clearly excessive or inadequate’, or representing a ‘substantial and marked departure’” from a fit sentence.

All indicate the “very high threshold that applies to appellate courts when determining whether they should intervene after reviewing the fitness of a sentence” (at para 52). IV. RANGE OF SENTENCE [ 12 ] While the accused did not argue that the sentencing judge erred by applying the wrong sentencing range, a review of the sentence must begin with a consideration of that issue. [ 13 ] In this case, there are two relevant sentence ranges – that related to a conviction for fraud under section 380(1) of the

Criminal Code and that related to a conviction for tax evasion under section 239(1)(

a) of the Income Tax Act and section 327(1)(

a) of theExcise Tax Act. [14] The cases provided to both the sentencing judge and this Court deal with accused convicted under both the fraudprovisions of section 380(1) of the Criminal Code and the tax evasion provisions of section 239(1)(

d) of the Income Tax Act and section327(1)(

c) of the Excise Tax Act. This accused, however, has not been convicted of fraud but only of tax evasion. This is an importantdistinction to consider because there are differences between those provisions, the principal difference being that the maximum sentencefor fraud is 14 years’ incarceration, while the maximum sentence for tax evasion is five years’ incarceration. The sentencing judgeremarked on this difference in his reasons but gave no indication as to the role, if any, that it played in his reasoning or in the ultimatesentence that he imposed.

Sentences for Fraud [15] In R v Wuckert, 2000 MBCA 5, this Court found that a sentence of between five and seven years would have beenwithin the applicable range for a multi-count fraud indictment involving 33 complainants and losses of $1,245,066.

The Court upheldthe sentence at trial of five years’ incarceration, with one year consecutive for a breach of recognizance. [16] Other courts have also held that the range for major frauds will usually be from three to five years. (See R v Dobis(2002), (ON CA), 163 CCC (3d) 259 at paras 32-47 (Ont CA); R v Bogart (2002), (ON CA),167 CCC (3d) 390 at para 36 (Ont CA), leave to appeal to SCC refused, 2003 CarswellOnt 1027; and R v Fontaine, 2009 MBQB 165 atpara 14.

See also R v Leo-Mensah, 2010 ONCA 139 at para 11 citing Bogart, leave to appeal to SCC refused, 33689 (2 December2010).) [17] Recently, in R v Davis, 2014 ABCA 115, the Alberta Court of Appeal stated that the range of sentence for fraudsexceeding $1,000,000 was between three and six years, and the Court increased the sentence in that case to one of four years’incarceration (see paras 34, 38). (See also the lower court sentences for fraud and tax evasion in R v Millar, 2017 BCSC 402; R vCameron, 2017 ABQB 554; and R v Wiafe, (8 November 2017), Toronto (Ont Ct J).) [18] While accused charged with what is essentially tax evasion under the provisions of the Criminal Code have argued thatthey should be sentenced according to the sentences for tax evasion, this argument has been met with mixed success.

The Ontario Courtof Appeal indicated, in R v Cancor Software Corp, 1993 CarswellOnt 901, that the trial judge was correct in turning to the tax evasioncases for guidance in sentencing for a conviction for a fraud that was, in essence, a tax evasion. In R v White (1997), (ON CA), 114 CCC (3d) 225 at 278, the Ontario Court of Appeal rejected the argument that the maximum sentence for a fraudconviction involving tax evasion should be limited to or capped at the five years set out in the tax legislation.

The Court of Appeal inBritish Columbia stated that the sentencing provisions of the Income Tax Act had no application to limit the sentence for fraud chargesunder the Criminal Code (see R v Wilder, 2008 BCCA 370 at para 9(a)). [19] When the bases of the arguments in each case are examined, I am of the view that there is no inconsistency in theoutcomes.

While it meets the goal of proportionality to look at the range of sentence for tax evasion even if the conviction is for a fraudrelated to a tax evasion, there is no basis upon which to find that the sentencing regime under the tax legislation limits the sentencesavailable under the Criminal Code in the particular ways suggested in White and Wilder.

Sentences for Tax Evasion [20] A review of the jurisprudence related to recent tax evasion sentences at the appellate level indicates a range of sentencefrom a conditional sentence to one year in jail, with the exception of the three-year sentence upheld by this Court in R v MacIver, 2000MBCA 76 , 2000 MBCA 82. (See R v Dwyer, 2001 CarswellOnt 3815 (CA); R v Breakell, 2009 ABCA 350; R v Klundert,2011 ONCA 646; R v Goett, 2012 ABCA 215; and R v Mahmood, 2016 ONCA 75.

See, also, the lower court sentences for tax evasionin R v Wilm, 2017 ONCJ 97; R v Schouw, (10 April 2017), Vancouver (BC Prov Ct); R v Bruderman, (19 June 2017), Vancouver (BCProv Ct); R v Dhudwal, (30 August 2017), Vancouver (BC Prov Ct); R v Gnanaratnam, (30 November 2017), Toronto (Ont Ct J); R vWilson, (4 December 2017), Cobourg (Ont Ct J); and R v Sidhu, (8 December 2017), Vancouver (BC Prov Ct).) [21] It must be noted, however, that, while these cases all involved the failure to declare a significant amount of incomeand/or to pay a significant amount of tax, the amount of tax evaded in each case except Klundert was less than $1,000,000 and none ofthe cases involved the added aggravating factor of fraud causing losses to a significant number of parties in addition to the government.

Standard of Review [22] In Lacasse, the Supreme Court of Canada reviewed, at some length, the role that sentencing ranges play in determininga fit sentence. Wagner J, for the majority, recognized that sentencing ranges play a valuable role in setting a sentence that is in paritywith other, similarly placed offenders committing a similar offence (see paras 56-57). That notwithstanding, he stated (at para 51): . . . [T]he choice of sentencing range or of a category within a range falls within the trial judge’s discretion and cannot in itselfconstitute a reviewable error.

An appellate court may not therefore intervene on the ground that it would have put the sentence in adifferent range or category. It may intervene only if the sentence the trial judge imposed is demonstrably unfit. [23] Thus, choosing a wrong sentencing range does not constitute an error of law that is reviewable on the standard ofcorrectness.

While it will be a factor in determining whether the sentence imposed was disproportionate and, therefore, demonstrablyunfit, it cannot, on its own, lead to a finding of an error of law that permits an appellate court to intervene and impose the sentence that itdetermines to be fit. The appellate court must still review the sentence to determine whether it was demonstrably unfit.

Analysis and Conclusion [24] Wagner J stated, in Lacasse, that the focus of the sentencing exercise must be on proportionality, as set out in section718.1 of the Criminal Code.

He noted that proportionality is determined on both an individual basis, related to the accused and theoffence, and by comparison to other offences committed in similar circumstances (see para 53). [25] The scheme in this case, on its facts, is the same as large-scale major frauds that are charged under section 380(1) of theCriminal Code, those facts being: a sophisticated and planned scheme resulting in over $1,000,000 in losses that involved multipletransactions over a lengthy period of time.

In the end, the 325 contributors who entrusted their funds to the accused lost significantamounts of money and the CRA spent a significant amount of time and resources to investigate this matter and to recover the unpaidtaxes and interest from the contributors. The accused played a pivotal role in setting up and running the scheme, which was in operationfor three years. [26] The jurisprudence holds that, for such schemes leading to a conviction for fraud, the most important sentencingprinciple is that of general deterrence. Mitigating factors and even rehabilitation become secondary.

The fact is that most major fraudsare committed by well-educated people of previously good character.

For these offences, absent unusual mitigating circumstances, apenitentiary sentence will be the norm. [27] The type of mitigating factors that have been accepted to reduce the sentence in major fraud cases include diagnosedmental health issues of the accused that contributed to the commission of the crime and/or significant hardship to dependant familymembers. (See R v Bunn, 2000 SCC 9 (the accused was the sole support for his wife, who had multiple sclerosis and was confined to awheelchair, and a teenage daughter); R v Tulloch, [2002] OJ No 5446 (the accused had a psychiatric condition that explained his conductand he co-operated with the authorities to identify and convict others involved in the illegal enterprise); and R v Khan, 2010 ONCJ 774(the accused was the only person who was able to look after his ex-wife, who had severe psychiatric problems).) While the accused inBogart had significant mitigating personal circumstances, the Court of Appeal still found that the conditional sentence that was imposedwas unfit and ordered a further 18 months of incarceration in addition to the time served on the conditional sentence, for a total effectivesentence of 31 and one-half months. [28] Although this accused was convicted of tax evasion, the facts are quite different from those found in recent tax evasioncases, both in terms of the magnitude of the amount of money at issue and the number of people affected by the accused’s illegalbehaviour.

The accused’s behaviour was, practically speaking, a fraud.

While his sentence, being under the tax legislation, would belimited to a maximum of five years’ incarceration, the sentencing judge was not limited to looking at the range of sentence for taxevasion convictions in determining a proportionate sentence. [29] Given that the accused was convicted of tax evasion and not fraud, based on circumstances more consistent with thoseof fraud than tax evasion, it would be open to the sentencing judge to look at the jurisprudence under both regimes in order to determinea proportionate sentence. [30] In the end, in my view, whether one looks at the sentencing range under the major fraud regime or the tax evasionregime, a sentence of three years’ incarceration is not demonstrably unfit.

It is clearly within the sentencing range for a major fraud, and,in fact, is at the lower end of that range. [31] If the range of sentence for tax evasion involving a significant amount of money, but less than $1,000,000, is between aconditional sentence and one year of incarceration, the circumstances of this case are sufficiently different that a higher sentence iswarranted. The amount of taxes at issue, being $2,366,367, and the fact that 325 individual contributors lost large amounts of moneysupport the three-year sentence that was imposed and render it a fit sentence.

Even if it would be considered a high sentence within therange of sentences for tax evasion, it would not be demonstrably unfit. [32] For these reasons, I would not find that the sentence was demonstrably unfit based on the sentencing judge’sconsideration of the applicable sentencing range. V. ANALYSIS – GROUNDS OF APPEAL (

i) Did the sentencing judge err in his weighing of evidence, sentencing factors and circumstances? [33] The accused has set out four grounds of appeal that relate to these issues: that the sentencing judge overemphasized theprinciples of denunciation and deterrence; that the sentencing judge failed to distinguish the different roles of the two accused, and erredin giving them the same sentence; that the sentencing judge failed to consider, or did not put sufficient weight on, the accused’s personalcircumstances, including the letters of support and his lack of a criminal record; and that the sentencing judge did not consider, or putappropriate weight on, the provisions of the Criminal Code and the jurisprudence regarding the imposition of a conditional sentenceorder. [34] In Lacasse, Wagner J emphasised the high level of deference to be paid to a sentencing judge’s weighing of the relevantfactors (at para 49): For the same reasons, an appellate court may not intervene simply because it would have weighed the relevant factors differently.

InNasogaluak [R v Nasogaluak, 2010 SCC 6], LeBel J. referred to R. v. McKnight (1999), (ON CA), 135 C.C.C. (3d) 41(Ont. C.A.), at para. 35, in this regard:

To suggest that a trial judge commits an error in principle because in an appellate court’s opinion the trial judge gave too much weight to one relevant factor or not enough weight to another is to abandon deference altogether. The weighing of relevant factors, the balancing process is what the exercise of discretion is all about. To maintain deference to the trial judge’s exercise of discretion, the weighing or balancing of relevant factors must be assessed against the reasonableness standard of review.

Only if by emphasizing one factor or by not giving enough weight to another, the trial judge exercises his or her discretion unreasonably should an appellate court interfere with the sentence on the ground the trial judge erred in principle. [ 35 ] In relation to the sufficiency of a trial judge’s reasons, McLachlin CJC stated, in R v REM , 2008 SCC 51 , that “[i]t follows that courts of appeal considering the sufficiency of reasons should read them as a whole, in the context of the evidence, the arguments and the trial, with an appreciation of the purposes or functions for which they are delivered” (at para 16).

She explained that a judge is not required “to set out every finding or conclusion in the process of arriving at the verdict” (at para 18) and that “[t]he object [of reasons] is not to show how the judge arrived at his or her conclusion, in a ‘watch me think’ fashion. It is rather to show why the judge made that decision” (at para 17).

As has often been explained, the analysis is a contextual one – the reasons are not to be read on their own, but in the context of the entire proceeding. [ 36 ] These comments are consistent with the high level of deference to be accorded to a sentence and would apply equally when reviewing the sufficiency of a sentencing judge’s reasons for sentence.

That said, the sentencing judge’s reasons in this case were quite lengthy and detailed. [ 37 ] The accused takes issue with the weight, or lack of weight, that the sentencing judge gave to several of the mitigating factors, such as the letters of support, his lack of any criminal record, his allegedly lesser role in the offence as compared to that of the co-accused and his true contrition. He argues that the sentencing judge only paid lip service to these factors in his analysis. [ 38 ] It is clear from reading the lengthy reasons of the sentencing judge that he referred to and considered all of these factors.

The Crown was asking for a sentence of four years’ incarceration, which the sentencing judge reduced to three to take account of the mitigating factors. The standard of review is that of deference, and I am not convinced that the sentencing judge in this case came to any unreasonable conclusions in his treatment of the accused’s personal circumstances and other mitigating factors. [ 39 ] The accused argues that the sentencing judge erred in failing to recognise his lesser role in the scheme, which should have led to him getting a lesser sentence than the co-accused.

He argues that the co-accused was more culpable because of his past involvement with the CRA when his earlier, similar scheme was rejected, in which the accused was not involved. He states that there is no evidence that the accused was aware of the co-accused’s earlier involvement with the CRA.

While this argument was not put to the sentencing judge, I am not convinced that it would or could have made a material change to the sentences. [ 40 ] While the two accused played somewhat different roles in the scheme, the sentencing judge was well aware of those different roles and also that the co-accused had a prior history of promoting earlier tax schemes that had been rejected by the CRA. The uncontested facts were that both accused were implicated in this scheme in significant, albeit different, ways, and both were first offenders.

The accused was described in the letters of support as a talented and successful businessman – he was not a simple dupe of the co-accused. The accused was involved in giving tax credit receipts to the contributors for four times the amount invested, which were intended to permit the immediate write-off of a loss that had not yet occurred, and he pled guilty to that offence.

He was integral to the implementation of this tax evasion scheme and to the operation of One World, and the facts do not support the argument that his role was materially less culpable than that of the co-accused or that it was an error in principle or unreasonable to give the two accused the same sentence. [ 41 ] The accused also argues that the sentencing judge overemphasised the principles of denunciation and deterrence.

Consistent with the jurisprudence noted above, Clayton C Ruby, Sentencing , 9th ed (Toronto: LexisNexis, 2017), states as follows regarding sentencing for tax offences (at p 1166): General deterrence appears to be the factor that judges sentencing in this area emphasize over all others. This means that they aim to craft sentences capable of instilling within all potential tax offenders a general apprehension before every harmful offence.

One court has stated that “the penalty should be severe enough to bring home to tax evaders that their action is a serious crime, not just social misbehaviour”. [ 42 ] The degree of emphasis to place on denunciation and deterrence, as opposed to rehabilitation, is part of the discretion to be exercised by the sentencing judge. The sentencing judge took into account both the mitigating and aggravating circumstances in arriving at his sentence, and, as already noted, he reduced the sentence from the four years requested by the Crown to three years to take into account the mitigating factors.

I can see no error in his reasoning in regard to the weighing of the sentencing factors and principles. [ 43 ] Finally, the accused argues that the sentencing judge erred in applying the principles related to conditional sentences. The principles related to the imposition of a conditional sentence were set out by the Supreme Court of Canada in R v Proulx , 2000 SCC 5 .

Lamer CJC stated that, if a penitentiary term of imprisonment is appropriate, then a conditional sentence should not be imposed (see para 58). [ 44 ] In this case, while the accused argued for a conditional sentence, the sentencing judge found that a penitentiary sentence was required. This is consistent with the jurisprudence set out above. In determining whether the sentencing judge erred in so finding, it is of note that the accused has not provided any cases based on similar facts in which a non-penitentiary sentence was imposed.

In fact, in Leo-Mensah , the Ontario Court of Appeal set aside conditional sentences as being unfit and indicated that a penitentiary sentence would be appropriate, and in Bogart , that Court found that an effective sentence of 12 months’ incarceration was

unfit and it imposed a penitentiary sentence of another two years. Thus, there is no basis upon which to find that the sentencing judge erred, either in law or in his weighing of the facts, in his conclusion that a penitentiary sentence was required and, therefore, a conditional sentence was not available. [ 45 ] In my view, the sentencing judge did not err in his weighing of the evidence, sentencing factors and/or in the sufficiency of his reasons related thereto.

Thus, I would dismiss these grounds of appeal. (ii) Did the sentencing judge err by imposing a sentence that was unfit and unduly harsh? [ 46 ] The accused has set out two grounds of appeal that relate to this issue: that the three-year concurrent sentences that the sentencing judge imposed were unduly harsh and unfit; and that the imposition of a further year of incarceration in default of payment of the fines and surcharges resulted in a crushing sentence. [ 47 ] The accused argues that the sentencing judge made this error because he gave insufficient weight to the letters of support and to the facts that he had no criminal record, that he entered a guilty plea at an early stage, that he showed true contrition, and that he played a lesser role than did his co-accused.

I have already dealt with the sentencing judge’s weighing of the factors. [ 48 ] He also argues that the sentencing judge overemphasised the Crown’s cases and underemphasised the defence cases. [ 49 ] The Crown provided the sentencing judge with a number of cases involving similar-fact situations and offences of a similar magnitude that support a sentence of three years’ incarceration – those and others are reviewed above. Thus, a sentence of three years is within the range of sentence for the circumstances of this offence.

The accused has not provided any cases in which a conditional sentence was given for an offence of this magnitude in similar circumstances. While that does not mean that a conditional sentence could never be granted, it does indicate that this penitentiary sentence was not “clearly or manifestly excessive” or that it “represent[ed] a ‘substantial and marked departure’” from a fit sentence ( Lacasse at para 52 ).

Therefore, it was not unduly harsh or demonstrably unfit. [ 50 ] The accused argues that the effect of the one-year consecutive sentence in default of payment of the fine makes the overall sentence crushing.

According to the law, a period of incarceration in default of the payment of a fine is not a further punishment that forms part of the sentence; rather, it is an enforcement mechanism to encourage payment of the fine, the fine being the punishment. (See Regimbald v Chow , 1925 CarswellQue 74 at para 27 (KB) ; and R v Wu , 2003 SCC 73 at para 27 , upholding Doherty JA, 2001 CarswellOnt 4332 at paras 32-34 (CA) ; in the context of fines imposed in lieu of forfeiture of proceeds of crime, see R v Lavigne , 2006 SCC 10 at paras 16 , 26; Hamel v R , 2006 NBCA 76 at paras 5-9 ; R v Dritsas (K) , 2015 MBCA 19 at para 58 ; and R v Angelis , 2016 ONCA 675 , leave to appeal to SCC refused, 37288 (23 February 2017).) [ 51 ] There is also an issue as to whether the sentencing judge erred by ordering that the fine be paid immediately without first determining whether the accused required or wanted time to pay.

Wu (SCC) explained the provisions in the Criminal Code for collecting a fine as follows (at para 60): Under the Code , a fine default is not punishable by committal unless the other statutory remedies, including licence suspensions and civil proceedings, are “not appropriate in the circumstances”, or “the offender has, without reasonable excuse , refused to pay the fine or discharge it under

section 736 [fine options program]”. . . . [ 52 ] It is of note that the civil collection proceedings under sections 734.5 and 734.6 of the Criminal Code are terminated if the accused serves a term of imprisonment in default of paying the fine (see

section 734.7(4) ). [ 53 ] In this case, the sentencing judge erred by not providing the accused with the option of paying the fine over a period of time following his release from prison (see Wu at paras 31-33 (SCC)). With the Crown’s consent, that error was corrected at the appeal hearing, where the accused was offered the option of having an extended period of time to pay the fine (the Crown suggested ten years). The accused stated that, if this Court upholds the sentence of imprisonment, he would prefer that the fine be payable immediately and the one-year default provision remain in effect.

The result will be that, when he is released, he will not be subject to civil proceedings to collect the fine. [ 54 ] In my view, the sentence was neither unduly harsh and demonstrably unfit nor crushing.

Thus, I would dismiss these grounds of appeal. (iii) Was the accused prejudiced as a result of being represented by the same lawyer as his co-accused? [ 55 ] The accused argues that, because the same lawyer represented him and the co-accused, the lawyer was not able to point out that the co-accused was the more culpable of the two and that the accused should have received a lower sentence. [ 56 ] This ground of appeal is very similar to that of ineffective assistance of counsel; however, it was not identified as such in the notice of appeal, with the result that this Court’s protocol for advancing this ground has not been followed. (See R v Munson , 2012 MBCA 111 ; and the Manitoba, Court of Appeal, Notice: Court of Appeal: Re: Directive Regarding Appeal Proceedings Involving Allegations of Ineffective Counsel in First Instance (15 January 2016) online: <www.manitobacourts.mb.ca/site/assets/files/1139/notice_re_ineffective_counsel.pdf>.) In particular, no

notice has been given to the lawyer who represented the accused at the sentencing and, as a result, that lawyer has not had the opportunity to explain either why he agreed to represent both accused or whether he considered the different roles of the two accused as it related to their sentences. It may be, for example, that he warned the accused of the risks of being represented by one lawyer and they may have agreed to accept that risk and proceed with one lawyer. Further, the accused has not provided his own evidence to explain why he and the co-accused decided to retain the same lawyer.

Thus, there is no factual basis for this ground of appeal. [ 57 ] That aside, I have already commented on the relative involvement and responsibility of the accused and the co-accused in this scheme (at para 40 herein). I am of the view that the evidence does not support the position that there was any realistic basis upon which to argue that the accused should have received a materially lower sentence than the co-accused. Thus, I would dismiss this ground of appeal. VI.

SENTENCING ERRORS [ 58 ] The Crown’s position at the sentencing hearing, which was adopted by the sentencing judge, was that a fine of $1,000,000 be imposed on each accused. In fact, the Income Tax Act and the Excise Tax Act both require that the court impose a minimum fine equal to the amount of the taxes that were evaded. As a result, the fine for each accused should have been $2,366,367. Its position is that this error should now be corrected.

In light of the Crown’s error, it is asking that the period of incarceration in default remain at one year consecutive to any other sentence that was imposed by the sentencing judge. The accused is not opposed to this correction. [ 59 ] The Crown is also asking that the victim surcharge be set aside because those provisions in the Criminal Code do not apply to these offences. The accused is not opposed to this correction. [ 60 ] I would, therefore, set aside the fine imposed on the accused and substitute a fine of $2,366,367. I would also set aside the victim surcharge. VII.

NEW EVIDENCE AT THE HEARING [ 61 ] At the appeal hearing, the accused advised this Court that he and his wife had separated a few weeks earlier and he is presently living in the family home with the children. He stated that he is the sole caregiver for the children, and that the children would be deprived of that care if he were to be imprisoned.

He argued that this is an unusual mitigating circumstance that supports the reduction of the sentence to less than two years and the imposition of a conditional sentence. [ 62 ] There was no motion for new evidence and no evidence was filed to support these representations.

As a result, the Crown had no opportunity to cross-examine the accused and was not in a position to comment in any substantive way. [ 63 ] The accused also advised the Court that he had just received a divorce petition filed by his wife and, when discussing the continuance of his bail, he stated that he may be changing addresses if he has to leave the family home. All of this indicates that the family situation is in a state of flux and uncertainty. In my view, it would not be appropriate to consider this information in its present form; thus, I would give it no weight. VIII.

DECISION [ 64 ] For the reasons set out above, I would dismiss the accused’s appeal of his sentence and uphold the three-year sentence of incarceration for the two tax evasion offences. I would set aside the victim fine surcharge. Finally, I would increase his fine to $2,366,367, payable immediately, but I would leave the time to be served in default of payment at one year consecutive to any other sentence. JA I agree: JA I agree: JA