Accessing Seized Funds For Legal Fees
- March 14, 2020
- Heather Ferg
When the police identify property believed to be proceeds of crime, the Criminal Code allows them to seize or restrain it. They can take anything from the change in someone’s pocket to all of their assets. While the aim of such seizures is to swiftly deprive criminals of their ill-gotten gains, a problem arises when a presumptively innocent person cannot afford a lawyer because the state took all their money.
The Criminal Code forfeiture provisions contain a return mechanism that allows an accused to apply for the release of seized assets to pay for reasonable legal fees. However, where property is ultimately proven to be proceeds and it is unavailable for forfeiture, there is also a provision that allows a sentencing judge to impose a fine in lieu of forfeiture and imprisonment where the fine is not paid without a reasonable excuse. This meant that when people had no other way of hiring a lawyer, they had to weigh the risk of fines and jail against having counsel fight their case.
The issue of when fines should be imposed where funds have been released for legal fees was considered by the Supreme Court of Canada in the 2019 case of R v Rafilovich. The latest direction from the court is that, generally speaking, fines should not be imposed where funds have been properly used for legal fees. While the state has a valid interest in alleged proceeds of crime, that interest should “take a back seat where it imperils an accused’s ability to access counsel” (para 43).
This post summarizes some of the basic contours of the Criminal Code proceeds of crime provisions as they relate to the majority decision in Rafilovich. It does not touch on other seizure and forfeiture mechanisms of which accused people and criminal lawyers should be aware (such as the various civil forfeiture regimes).
1. Seizing Proceeds of Crime Under the Criminal Code
Where property is believed, on reasonable and probable grounds, to be proceeds of crime, the provisions in Part XII.2 of the Criminal Code allow the police to seize or restrain it. Typically, assets seized in this manner are held by the police over the course of the criminal proceedings and when an accused person is found or pleads guilty, the Crown can seek forfeiture of the property at the sentencing hearing. Where the Crown is unable to establish funds or assets are proceeds, the property is returned.
2. The Release of Funds for Legal Fees
The regime created by Part XII.2 includes a procedure that allows accused people charged with a designated offence to apply for the release of seized property for prescribed purposes. Where an accused has “no other assets or means available,” they may apply to the court to have funds released for purposes that include paying for reasonable living expenses for oneself or one’s dependants or reasonable legal and business expenses. (See s 462.34(4))
Where an accused makes an application of this nature, they must lead evidence as to their personal circumstances and financial status. Such people have often been denied Legal Aid because the seized asset has been counted against them even though they cannot access it. The judge on such an application conducts an in-depth inquiry into the situation. If satisfied that the return of some or all of the property is appropriate, an order may be crafted setting out strict terms and conditions governing its release and use.
3. The Catch
If an accused is found or pleads guilty, the sentencing judge will determine a fit sentence and whether the Crown has proved that seized property is proceeds of crime. Where the property is no longer available for forfeiture s 462.37(3) states that the judge may order that a fine be imposed in lieu. Where the fine is not paid, an offender may be imprisoned.
4. Rafilovich And The Exercise Of The Discretion To Fine
In Rafilovich, the court directly addressed the issue of how a sentencing judge should treat assets that have been released for the purpose of paying legal fees when deciding whether to impose a fine in lieu of forfeiture. It was held that, generally speaking, a fine should not be imposed when funds are no longer available because they have been spent on counsel as contemplated by the return provision. Where property has been released for fees, fines of this nature should only be ordered where there has been some form of wrongdoing or a change in circumstance that undermines the objectives of the return provisions (para 76).
(a) The Lower Court Decisions
Mr Rafilovich was arrested for drug offences twice. The police searched his car and his two apartments. They seized a number of items including drugs and $42,000 in cash. The police alleged that the money was proceeds of crime. Mr Rafilovich was denied Legal Aid and he applied to the trial judge to have the funds released for legal fees. He met the financial need requirements and his application was granted. The funds were made available on strict conditions.
Mr Rafilovich ultimately pled guilty to possessing a counterfeit identity document, two counts of possession of cocaine for the purpose of trafficking and two counts of possessing proceeds of crime over $5,000. He was sentenced to 36 months imprisonment. The trial judge declined to impose a fine in lieu of forfeiture and the Crown appealed. (Paras 13-16.)
The Ontario Court of Appeal unanimously allowed the Crown’s appeal and imposed a fine of $41,967.39. The court also ordered that if Mr Rafilovich failed to pay the fine without a reasonable excuse, he would be jailed for an additional 12 months. Mr Rafilovich was granted leave to appeal to the Supreme Court of Canada. (Paras 16-18.)
(b) The Supreme Court Majority Decision
Justice Sheilah Martin (writing for the majority with Justice Michael Moldaver dissenting, in part) framed the question at issue as whether the proceeds of crime provisions of the Code require courts “to give with one hand, only to take away with the other” (para 1). She reviewed the legislative history of the provisions (including the parliamentary debate) and R v Lavigne, the leading decision of the court in the area. She noted that the overall goal of the regime is to ensure that “crime does not pay” (para 2) and that profit-generating offences are not allowed to benefit the offender (para 33). She also noted that the legislation has secondary purposes, namely providing access to counsel and giving meaningful weight to the presumption of innocence (para 37).
(i) The Presumption of Innocence
Under Canadian law, an accused person is innocent until proven guilty beyond a reasonable doubt in a fair and impartial hearing. The presumption of innocence is one of the pillars of the legal system contained in s 11(d) of the Charter of Rights and Freedoms.
It is difficult to explain the importance of the presumption of innocence without sounding hyperbolic. Its most basic purpose is to protect individual liberty and human dignity. It sets a minimum standard for fairness when a citizen stands accused by the state. It also reflects Canadian community values. As Chief Justice Brian Dickson explained in the 1986 Supreme Court of Canada decision of R v Oakes, the presumption of innocence “confirms our faith in humankind; it reflects our belief that individuals are decent and law-abiding members of the community until proven otherwise” (para 29).
In the context of seized assets, Justice Martin noted that when the state seizes assets from an accused person, they are taking them from someone who is presumptively innocent. When an accused spends seized money on legal fees, they are spending their own money to defend the allegations against them. To deny them this ability engages underlying concerns about basic fairness. The return provision was designed to ensure that individuals should not be left unable to hire a lawyer because the state took all of the money with which they could have done so. (Paras 45-47.)
(ii) Fines Should Generally Not be Imposed
The Crown in Rafilovich argued that seized funds released for legal fees should be viewed as “something akin to a loan” (para 52). In rejecting this submission, the majority held that such an approach would undermine the objectives of the provision and render the ability to access counsel largely illusory. It would deter people hiring counsel because of fears of fines or longer incarceration and retroactively dilute the presumption of innocence (paras 56-57). The “benefit” of having counsel is one that Parliament expressly intends for accused people to have and is not the kind of “benefit” a fine (or imprisonment) is designed to prevent (paras 64-67).
Rafilovich also provides guidance as to when a fine in lieu of forfeiture is appropriate when funds have been released for legal fees. For example, if an accused misrepresents their financial position in the application, misuses the funds or experiences a change of circumstances in terms of their ability to pay, a fine may be appropriate. The question in such circumstances is whether the offender’s use of funds advanced or undermined the purposes of the return provisions. (Paras 66-68.)
The majority in Rafilovich expressly acknowledged the reality that less money would be available for the Crown because the accused had used it to finance his defence. However, this result was in accordance with the values and objectives of the Canadian legal system. As Justice Martin commented, “[a] fundamental purpose of the criminal justice system is to provide a fair process to achieve just results, not to extract maximum retribution at any cost” (para 68).
Legal mechanisms designed to ensure fair trials must not be interpreted in a way that renders constitutional rights illusory. Rafilovich represents a meaningful step away from the old cliché of “innocent until proven broke.”