Criminal Law: Forfeiture; Legal Fees

R. v. Rafilovich, 2019 SCC 51 (37791)

“R was arrested for possession of cocaine for the purpose of trafficking. The police seized about $42,000 in cash, found when searching his car and apartments, as potential proceeds of crime under Part XII.2 of the Criminal Code . Before trial, R applied under s. 462.34(4) (c)(ii) of the Criminal Code  for the return of the seized funds to pay for reasonable legal expenses associated with his case. The application was allowed and the funds returned to pay for reasonable legal fees, with conditions. R pled guilty to several offences at trial. The sentencing judge imposed a term of imprisonment and forfeiture of R’s interest in an apartment, but declined to impose a fine instead of forfeiture equal to the amount of the returned funds spent by R on his legal fees as requested by the Crown under s. 462.37(3)  of the Criminal Code. The Crown appealed. The Court of Appeal varied the sentencing order, adding a fine instead of forfeiture of $41,976.39, equal to the amount of the returned funds, and 12 months’ imprisonment should R not pay his fine.”

The S.C.C. (6:3, in part): allowed the appeal, set aside the Court of Appeal’s order.

Martin J., wrote as follows (at paras. 4-6, 8-11, 56-57, 84-85):

“…Parliament created a specific procedure within the Code ’s proceeds of crime regime that allows accused persons to seek the return of some or all of the seized property for certain designated purposes if the accused has “no other assets or means available” (s. 462.34(4) ). Parliament’s list of approved purposes expressly includes reasonable legal expenses (s. 462.34(4) (c)(ii)). Under this procedure, which occurs early in a criminal proceeding, an accused applies to a judge to ask for the return of seized property to pay for a lawyer (s. 462.34(1) ). Thereafter, two separate hearings are held, evidence is tendered, and the judge determines: (1) whether the accused actually needs any of the seized property to pay for reasonable legal fees (ss. 462.34(4)  and 462.34(5) ); (2) what amount may be returned; and (3) the appropriate terms related to the return of the funds (s. 462.34(4) ). The return of any seized funds is, therefore, done under the authority of a judicial order. Returned funds are normally held in trust by legal counsel, to be used only for the defence of the accused, and such funds are no longer considered to be seized property held by the state.

The criminal process will then proceed. If the accused person is convicted or pleads guilty, there will be a sentencing hearing to impose a fit and proportionate criminal penalty. The sentencing judge will also determine what, if any, of the offender’s property (including property previously seized) has been proven to be proceeds of crime. As a general rule, property proven to be proceeds of crime must be forfeited to the Crown (s. 462.37(1)).

Parliament has also addressed the situation in which property proven to be proceeds of crime at sentencing is not available for forfeiture to the Crown, such as situations where the money has been spent or given to a third person. In such a case, the sentencing judge may order a “fine instead of forfeiture” equal to the amount proven to be proceeds of crime (s. 462.37(3) ).The offender’s failure to pay the fine may result in imprisonment (s. 462.37(4)).

…the application of the principles of statutory interpretation leads to the conclusion that, generally speaking, sentencing judges should not impose a fine instead of forfeiture in relation to funds that have been judicially returned for the payment of reasonable legal fees associated with an accused’s criminal defence. This approach is most faithful to Parliament’s intent.

…While it is true that the proceeds of crime regime as a whole seeks to ensure that crime does not pay or benefit the offender, the legal expenses return provision pursues secondary purposes, namely: (1) providing access to counsel and (2) giving meaningful weight to the presumption of innocence. Underlying both of these objectives is a desire to ensure fairness to the accused in criminal prosecutions. Clawing back reasonable legal fees as a fine instead of forfeiture would, in most cases, undermine these equally valid purposes.

At the same time, where it turns out that the offender did not have a real financial need or the funds were not used to alleviate that need, it would be appropriate for a judge to impose a fine instead of forfeiture, as this would align with Parliament’s intent. For example, this might occur where there is wrongdoing in the return of funds application, such as the misrepresentation of the accused’s financial position. It might also occur where there is wrongdoing in the administration of the return order, such as funds not being applied in the manner contemplated, expenditures for purposes outside the scope of the return order, or fees in excess of judicially-authorized limits. Further, it might occur where the accused experiences an unexpected change in circumstances after the funds have been returned but before sentencing, such that recourse to returned funds is no longer necessary after the accused became aware of the changed circumstances. These are examples of the kinds of situations that undermine the basis of the return order such that Parliament would have intended to recover the returned monies by way of a fine.

In the context of this case, because ordering a fine would undermine Parliament’s intent in enacting the legal expenses return provision, I would allow the appeal and set aside the Court of Appeal’s order, which imposed a fine and imprisonment in default of payment.

When an accused person cannot access legal counsel, the presumption of innocence suffers. This is because, in facilitating the accused’s right to make full answer and defence, defence counsel help to ensure that the case remains the Crown’s to prove. It is difficult for lay persons accused of criminal offences to effectively navigate “the increased complexity of criminal cases” that this Court has described as affecting “most cases” in our criminal justice system (R. v. Jordan, 2016 SCC 27, [2016] 1 S.C.R. 631, at paras. 53 and 83).

Nor is the importance of the presumption of innocence, “spent” once an accused person is found guilty (at para. 71).  The criminal justice system does not, and should not, retroactively dilute the presumption of innocence after an accused is found guilty, nor does it attach preconditions or penalties to reliance on the presumption. Imposing retroactive penalties on accused persons who rely on the presumption of innocence can have no effect but to undermine the presumption and the protections it affords to accused persons. For example, the presumption of innocence underlies the concept of bail (R. v. Antic, 2017 SCC 27, [2017] 1 S.C.R. 509, at para. 1).  The time spent free on bail is not added back at sentencing; to the contrary, restrictive bail conditions can be a mitigating factor at sentencing.

The discretion to order a fine must be exercised in a manner consistent with all of Parliament’s objectives of the proceeds of crime regime including, where applicable, the return provision. The purposes of the legal expenses return provision include providing access to counsel and giving meaningful weight to the presumption of innocence. Underlying these two purposes is an intent of Parliament to create a fair procedure for the return of funds for reasonable legal expenses while also allowing for the seizure, return, and forfeiture of proceeds of crime. In most cases, clawing back reasonable legal fees as a fine instead of forfeiture would undermine these purposes. Moreover, the payment of reasonable legal fees is neither the type of benefit at which the provisions are aimed nor the kind of “transfer” to a third party contemplated in the fine instead of forfeiture provision.

For all of these reasons, generally speaking, a fine instead of forfeiture should not be imposed on funds that have been judicially returned for the payment of reasonable legal expenses. There remains, however, discretion to order a fine in cases where the offender did not have a real financial need for the returned funds, or the offender did not use the funds to alleviate that need. In this way, courts can give full effect to Parliament’s intended purposes.”

Moldaver J., dissenting in part (with Wagner C.J., and Côté J. concurring) wrote as follows (at paras. 92-94):

“With respect, I reject this approach. Stripped of the legal niceties in which it is couched, the approach taken by my colleague sends a clear and unmistakeable message — crime does indeed pay. For reasons that follow, I am of the view that the statutory regime’s primary objective of ensuring that crime does not pay need not and should not be sacrificed on the altar of the “secondary purposes” relied on by my colleague. Imposing a fine in lieu where an offender has used proceeds of crime to pay for his or her own defence achieves the regime’s primary objective of ensuring that crime does not pay; and it does not undermine the utility of the restoration provision, which facilitates access to counsel in a manner that is both fair and consistent with the presumption of innocence. In this way, all of the statutory scheme’s objectives can be achieved.

However, there is in my view an important exception to the general rule that a fine in lieu should be imposed where an offender has used proceeds of crime to pay for his or her own defence. Where a sentencing judge is satisfied, applying the test set out in R. v. Rowbotham (1988), 41 C.C.C. (3d) 1 (Ont. C.A.), that representation by counsel was essential to the offender’s constitutional right to a fair trial under ss. 7  and 11 (d) of the Canadian Charter of Rights and Freedoms , the judge should exercise his or her limited discretion not to impose a fine in lieu in respect of the released funds. This interpretation gives proper effect to Parliament’s objective of ensuring an effective forfeiture regime while still vindicating the constitutionally protected right to counsel, and more particularly, the constitutional right to state-funded counsel in limited circumstances.

In this instance, the sentencing judge did not consider whether representation by counsel was essential to Mr. Rafilovich’s constitutional right to a fair trial before exercising her limited discretion not to impose a fine in lieu. As the record before this Court is insufficient to decide this issue, I would remit the case to the sentencing judge for determination.”

Full Decision