R. c. Lavallée, 2016 QCCA 1655
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[15] At the outset, it is useful to note that the Victims Bill of Rights Act has brought amendments to the provisions of the Criminal Code dealing with restitution orders. A new section 739.1 to the Criminal Code now specifically sets out that an offender’s financial means or ability to pay does not prevent a court from making a restitution order. However, this new provision only applies in respect of conduct engaged in on or after its coming into force. Section 739.1 has therefore no bearing on this appeal.
[16] In The Queen v. Zelensky, a case dealing with what was called a compensation order under then section 653 of the Criminal Code, Chief Justice Laskin identified certain factors to be considered before issuing such an order:
There is, moreover, another important aspect of s. 653 that must be kept in mind. The Court's power to make a concurrent order for compensation as part of the sentencing process is discretionary. I am of the view that in exercising that discretion the Court should have regard to whether the aggrieved person is invoking s. 653 to emphasize the sanctions against the offender as well as to benefit himself. A relevant consideration would be whether civil proceedings have been taken and, if so, whether they are being pursued. There are other factors that enter into the exercise of the discretion, such as the means of the offender, and whether the criminal court will be involved in a long process of assessment of the loss, although I do not read s. 653 as requiring exact measurement. […] What all of this comes to is that I agree with Matas J.A. that, constitutionality apart, an order for compensation should only be made with restraint and with caution.
[Emphasis added]
[17] That case involved the commission of a theft. The restitution order was initially issued by the sentencing court at the request of the victim, the T. Eaton Company Limited, as a substitute for or reinforcement to the civil proceedings it had initiated against the offender. Laskin C.J. found this to be an inappropriate use of the Criminal Code provision, concluding that it is not proper to seek a restitution order “in terrorem as a substitute for or a reinforcement for civil proceedings”.
[18] The issue of whether the financial capacity of an offender should be taken into account to refuse a restitution order in a fraud case was subsequently canvassed by the Supreme Court of Canada in Fitzgibbon. That case involved the misappropriation of funds entrusted to a lawyer by his clients. As an integral part of his sentence, the offender was ordered to reimburse the Law Society of Upper Canada the amounts it had paid to partially compensate the offender’s clients. He was also ordered to reimburse a client for that portion of the loss suffered which had not been compensated by the Law Society.
[19] Since the offender was an undischarged bankrupt, the issue arose as to whether consent had to be obtained from the bankruptcy court before the compensation order could be made. In finding that no such consent was required, Cory J., writing for a unanimous Supreme Court, found that when fraudulent acts are involved, the claims of the victims should be paramount over the offender’s ability to pay. He justified that finding on the provisions of the then Bankruptcy Act (which are still in force today) providing that the eventual bankruptcy discharge of the appellant would not release him from any debt or liability arising out of his fraudulent actions:
On the facts of the present case, such an order was appropriate. Fitzgibbon acknowledged that he had defrauded his clients of the amount agreed to at his trial. The Law Society had compensated the appellant's defrauded clients and was subrogated to their rights against him. Rudolph Gatien was also entitled to the balance defrauded from him for which he had not been compensated by the Law Society. The order was thus appropriate to allow compensation for the Law Society and Gatien.
In summary, it can be seen that compensation orders are an extremely useful part of the sentencing procedure. They are often used in sentencing young persons or first-time offenders who have not committed crimes of violence. Their value cannot be over-emphasized. Much of the efficacy of these orders is the immediacy of their effect. If it is possible, they deserve to be available for consideration in the sentencing of all offenders. It remains only to be determined whether the order could be validly made when the appellant was an undischarged bankrupt at the time of sentencing.
The fact that the appellant is an undischarged bankrupt raises two issues. First, it was recognized in Zelensky that the means of the accused person should be taken into account when a court is considering making a compensation order. However, in the case at bar, the sentencing judge was aware that the appellant was an undischarged bankrupt at the time of the sentencing and nevertheless properly exercised his discretion to make the order. In the Court of Appeal, Martin J.A. carefully considered the words of Laskin C.J. in Zelensky. He concluded that the means of the offender should not in every case be the controlling factor. I agree with that conclusion of Martin J.A.
The appellant was a lawyer who defrauded his clients. He used his position to defraud the very persons who had every reason to trust and rely upon him. The fraudulent acts of a lawyer directed against his own clients warranted the imposition of a compensation order even though the lawyer's means at the time of sentencing were minimal. The claims of the victims of fraudulent acts should be paramount. This seems to be recognized by s. 148 (now s. 178) of the Bankruptcy Act. That section provides that the discharge of a bankrupt does not release him from any debt or liability arising out of a fraudulent act committed by him while acting in a fiduciary capacity. The Bankruptcy Act itself, therefore, permits claims of fraud to survive the discharge of a bankrupt, and the fact that Fitzgibbon is an undischarged bankrupt should not allow him to avoid the imposition of this compensation order as part of his sentence.
[Emphasis added]
[20] As a result, though the means of the offender is a factor to take into account when deciding to issue a restitution order, that factor has much less weight when restitution is to compensate victims of a fraud carried out by the offender as a trustee or administrator of property of others or as a result of the offender obtaining property or services by false pretences or fraudulent misrepresentation.
[21] This approach has been followed by numerous Canadian appellate courts.
[22] In R. v. Castro, Weiler J.A. (as he then was) stated that “in cases involving breach of trust, the paramount consideration is the claims of the victims […] Ability to pay is not the predominant factor”. He summarized the applicable principles as follows:
[35] To summarize, a restitution order is simply part of the determination of an overall fit sentence, and general sentencing principles apply. While consideration of the offender's ability to pay and the impact of a restitution order on an offender's rehabilitation are factors to be considered, the weight to be given to these factors will vary depending on the nature of the offence and the circumstances of the offender. When the offence involves a breach of trust, a primary consideration is the effect on the victim; rehabilitation is a secondary consideration. Furthermore, consideration of the ability to pay includes the ability to make payment from the money taken as a source of restitution.
[Emphasis added]
[23] Likewise, in R. v. Johnson, the Alberta Court of Appeal noted that “an offender’s means have limited import in cases of fraud”, adding that “where a breach of trust is involved, a restitution order may be made even where there does not appear to be any likelihood of repayment”.
[24] This principle was again recently reiterated by the Ontario Court of Appeal in R. v. Wa:
[12] When determining whether to impose a restitution order, the sentencing judge must consider the offender's ability to pay. However, where the circumstances of the offence are particularly egregious, such as where a breach of trust is involved, a restitution order may be imposed even if there does not appear to be any likelihood of repayment: R. v. Castro, 2010 ONCA 718, 102 O.R. (3d) 609, at para. 28. As the sentencing judge found, the fraud in this case was a clear breach of trust, which was particularly odious given the charitable nature of the work performed by the victim.
[Emphasis added]
[25] As for this Court’s decision in Legault, it has no bearing on the issue at hand. That case concerned an order in the amount of $1,174,499.04 against an offender as restitution for setting fire to a house. Since fraud or breach of trust were not at issue in that case, this Court was compelled to take into account the offender’s capacity to pay under the principles set out in Fitzgibbon. The distinction is important, since in Legault, the offender did not financially benefit from the fire, while in fraud cases, such as the one involving the appellant, the offender personally benefits financially from the offence. As recently noted by Bennett J.A. in R. v. Nanos, a case involving similar facts as Legault, where the offender does not profit financially from the offence, his ability to pay restitution becomes a more relevant factor. Moreover, Legault does not state that inability to pay, as a matter of principle, precludes a restitution order.
[26] In Bendwell, while the Court did take into account the means of the offender with respect to a restitution order in a context of a fraud, this was in circumstances where civil proceedings had been initiated which would allow the victims to obtain judgment in their favour. As noted by Laskin C.J. in Zelensky, a relevant consideration to a restitution order is whether civil proceedings have been brought against the offender. It is in that context that Bendwell should be understood. Moreover, in that case the offender had been diagnosed with cancer. We do not read Bendwell as contradicting the statement in Fitzgibbon that little weight should be given to the offender’s ability to pay when considering restitution in a fraud case. Rather, Bendwell turns on its own specific facts.
[27] We conclude from this analysis that the sentencing judge’s decision not to order restitution in this case was based on an error of principle. Indeed, with respect to a judge’s discretion to order restitution in the context of a fraud, the primary consideration is the effect on the victim; the rehabilitation of the offender is a secondary consideration. This does not imply that a restitution order must be issued in all fraud cases; rather, it requires the sentencing judge to pay particular attention to the effects on the victim.
[28] Where there is no expectation that the victim will ever receive payment pursuant to the restitution order, or where the offender is impecunious and the effect of the fraud on the victim is financially insignificant to that victim taking into account the victim’s entire financial situation, then a sentencing judge may well conclude that a restitution order serves no compelling purpose for the victim and refuse to grant such an order. However, where the effect of the fraud on the victim is significant and there is some expectation, even faint, that the offender may be in a position to eventually comply, in whole or in part, with the restitution order, then the primary consideration must be the effects on the victim and a restitution order should follow.
