COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Earle, 2021 ONCA 34

DATE: 20210120

DOCKET: C66898

MacPherson, Tulloch and Lauwers
    JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

David Earle

Appellant

Richard
    Litkowski, for the appellant

Michael
    Fawcett, for the respondent

Heard: December 16,
    2020 by video conference

On appeal
    from the conviction entered on May 24, 2017 by Justice Nola E. Garton of the
    Superior Court of Justice, and from the sentence imposed on January 25, 2018.

Lauwers J.A.:

A.

Overview

[1]

The appellant was convicted of fraud
over $5,000, contrary

to s. 380(1) of the
Criminal Code
. His convic
tion
    for money laundering under s. 462.31(1)(a) of the
Criminal Code
was
    based on the same facts as the fraud and was stayed under the
Kienapple
principle. He was sentenced to three years in jail along with ancillary orders
    that included a restitution order and a fine in lieu of forfeiture order. He
    appeals his conviction and seeks leave to appeal sentence.

[2]

For the reasons that follow I would dismiss the
    conviction appeal and the sentence appeal except for the victim surcharge.

B.

The Factual Context

[3]

The trial judge found that the appellant defrauded
    clients of his company, Global Precious Metals (GPM), of almost one million
    dollars over a period of about four years, from 2007-2011. She found that some
    of the money was used to finance other business transactions including highly
    speculative securities trading, the appellants gambling, and payments towards
    his personal credit card debts.

[4]

The appellant learned the precious metals
    business as an employee of Advanced Precious Metals (APM), which sold
    physical precious metals. When he established GPM, the appellant did not use
    the same business model as APM, but he solicited his APM customers and used
    many of his old employers business documents.

[5]

The appellant led his clients to believe that
    their money was being used to purchase physical precious metals. However, the
    trial judge found that the clients were only purchasing a notional metal
    position on GPMs books and that GPM had no actual inventory of physical
    precious metals.

[6]

There were 17 victims of the appellants fraud,
    seven of whom testified at the trial. The appellant acknowledged in his factum
    that: In general, the clients testified that they understood that the money
    they deposited with GPM had been used to buy physical silver.

[7]

Eventually, in early 2011, GPM went bankrupt,
    leaving its clients with a net loss of $986,128.71, which the trial judge
    attributed to the appellants fraud.

[8]

The trial judge found that the appellant had
    deceived GPM clients as to the true nature of his business through oral and
    material representations as well as by failing to disclose material facts. In
    her sentencing reasons, the trial judge summarized the ways in which she found
    that the appellant had deliberately misled GPMs clients:

1.

The appellant led his clients, including his former
    APM clients, to believe that GPM possessed an inventory of physical precious
    metals when the company had no such inventory;

2.

He led his clients to believe that he was purchasing
    precious metal in accordance with their purchase at the time that the orders were
    made;

3.

He led clients to believe that GPM was financing
    their precious metal purchases; and

4.

He failed to advise GPMs clients of the
    differences between the APM and GPM
business
models.

C.

Issues on the Appeal

[9]

The appellant raises five issues on appeal:

1.

The trial judge erred in dismissing the appellants
    application under s. 11(b) of the
Canadian Charter of Rights and Freedoms
;

2.

The
    trial judge erred in failing to consider the fact that the appellant sought
    legal
advice
on the viability of GPM as a factor to
    support his credibility and
to negate the fault element of
    fraud;

3.

The appellant received ineffective assistance of counsel;

4.

The amount of restitution, and the corresponding fine in lieu of forfeiture,
    should be reduced based on miscalculations of the actual investor losses and
    the monies returned to them;

5.

The victim fine surcharge should be quashed under
R.
    v. Boudreault
, 2018 SCC 58, [2018] 3 S.C.R. 599.

I will address each issue in turn.

(1)

The trial judge did not err in dismissing the
    appellants s. 11(b)
Charter
application

[10]

This case proceeded uneventfully under the
    principles set out by the Supreme Court of Canada in
R. v. Morin
,
[1992]
    1 S.C.R. 771
. The appellant was arrested on August 15, 2012. The
    three-week trial was originally scheduled to start on October 13, 2015 and
    would have been completed well before the Supreme Court issued its tectonic
    decision in
R. v. Jordan
, 2016 SCC 27, [2016] 1 S.C.R. 631 on
    July 8, 2016. But the serious illness of the Crown prosecutor caused the trial
    to be adjourned until September 19, 2016, about ten weeks after
Jordan
was released.

[11]

At no point before
Jordan
was released did
    defence counsel suggest that a s. 11(b)
Charter
application would be
    appropriate under
Morin
. However, after the release of
Jordan
,
    the defence brought a motion at the outset of trial to dismiss the case under
    s. 11(b) for undue delay.

[12]

I begin with a review of the governing
    principles under
Jordan
, describe the trial judges decision
    dismissing the appellants s. 11(b)
Charter
application, and then
    apply the principles to the facts.

(a)

The governing principles

[13]

The Supreme Court reset the principles governing
    delay applications under s. 11(b) in
Jordan
, which became the ruling
    authority even for cases that were almost all the way through to trial when it
    was released.
I will not rehearse the general
    principles, which were recently laid out by this court in
R. v. Villanti
,

2020 ONCA 755
    and in the cases it cited
. Instead I will focus on
the transitional exceptional circumstance applicable to
    proceedings commenced before
Jordan
was released, as in this case.

[14]

In
Jordan
, the Supreme Court held that
    the transitional exception is to be applied contextually when the Crown
    satisfies the court that the time the case has taken is justified based on the
    parties reasonable reliance on the law as it previously existed even where,
    as here, the delay
exceeds
the [
Jordan
] ceiling (emphasis
    in original): at para. 96, referring to
Morin.
The court continued: This
    requires a contextual assessment, sensitive to the manner in which the previous
    framework was applied, and the fact that the parties behaviour cannot be
    judged strictly, against a standard of which they had no notice. The
    concluding sentence is especially telling: Of course, if the parties have had
    time following the release of this decision to correct their behaviour, and the
    system has had some time to adapt, the trial judge should take this into
    account.

[15]

The changes wrought by
Jordan
were
    intended to be sweeping, but not abrupt: Ultimately, for most cases that are
    already in the system, the release of this decision should not automatically
    transform what would previously have been considered a reasonable delay into an
    unreasonable one: at para. 102. The court added, at para. 98: We rely on the
    good sense of trial judges to determine the reasonableness of the delay in the
    circumstances of each case.

[16]

The factual findings made by the trial judge in
    the course of a
Jordan
analysis are entitled to deference and can only
    be set aside for palpable and overriding error:
R. v. Bulhosen
, 2019
    ONCA 600, 377 C.C.C. (3d) 309, leave to appeal refused, [2019] S.C.C.A. No. 423,
    at para. 73;
R. v. Majeed
, 2019 ONCA 422, at para. 7; and
R. v. Jurkus
,
    2018 ONCA 489, 363 C.C.C. (3d) 246, leave to appeal refused, [2018] S.C.C.A.
    No. 325, at para. 25.

(b)

The trial judges reasons

[17]

The trial judge heard the application from
    September 19, 2016, the first day of trial, to September 22, 2016, when she
    dismissed the application with reasons to follow. Her detailed and lengthy
    reasons were released on November 24, 2017.

[18]

Analytically, the trial judge proceeded in two
    stages. She first assessed the delay under the
Jordan
principles and
    then, taking her cue from
R. v. Williamson
, 2016 SCC 28, [2016] 1
    S.C.R. 741, undertook the
Morin
analysis under the rubric of the
    transitional exception in
Jordan
. Her
Morin
analysis occupied
    nearly 15 pages.

[19]

Under the
Jordan
analysis, the trial
    judge fixed the total delay from the laying of the information to the
    anticipated conclusion of the trial at 50 months, which is 20 months in excess
    of
Jordans
30-month presumptive ceiling. She addressed five issues
    raised by the applicant: 1) the Crowns inaccurate time estimate relating to
    the preliminary inquiry; 2) the delay in obtaining state funding for legal
    counsel via the
Rowbotham
application; 3) the delay caused by the
    illness of the prosecuting Crown; 4) the complexity of the case; and 5) the
    transitional exceptional circumstances.

(i)

The inaccurate time estimate relating to the
    preliminary inquiry

[20]

The appellant took the position that the Crown
    had created additional delay by underestimating the time required for the
    preliminary inquiry, which was planned for 11 days but spilled over to 15. He argued
    that the need to schedule additional days and the Crowns unavailability meant
    that the delay from August 29, 2013 to January 22, 2014 was properly Crown
    delay, set at 4 months, 24 days.

[21]

The trial judge found that the time estimates
    for the preliminary inquiry were done in good faith and that the delay should
    be treated as a discrete exceptional circumstance to be deducted from the
    overall delay in the amount of 4 months and 25 days.

(ii)

The delay in obtaining state funding for legal
    counsel via the
Rowbotham
application

[22]

Following his lawyers departure from private
    practice, and the exhaustion of his financial resources, the appellant sought
    an adjournment on February 27, 2014 in order to seek state funding for counsel.
    The appellant applied to Legal Aid Ontario and brought an application under
R.
    v. Rowbotham
(1988), 41 C.C.C. (3d) 1, [1988] O.J. No. 271. Legal Aid
    refused funding and dismissed the appellants final appeal on July 4, 2014. The
    appellant and the Crown exchanged materials on the
Rowbotham
application
    over the summer of 2014 before the Crown finally consented to state funding. The
    Crown provided the appellant with a funding agreement on October 15, 2014 and
    the parties brought the agreement before the court on October 20, 2014. The total
    delay relating to the appellants funding was therefore from February 27, 2014
    to October 20, 2014.

[23]

The appellant argued that the
Rowbotham
application took too long to process. The law is clear from
R. v. Boateng
,
    2015 ONCA 57, 128 O.R. (3d) 372, at para. 32, that the Crown is required
    to note and respond to potential delays resulting from Legal Aid delays in
    processing. Adding the
Rowbotham
period as institutional delay under
    the
Morin
framework would, the appellant argued, bring the total
    institutional delay to 20 months, surpassing what
Morin
deemed
    acceptable.

[24]

The trial judge found the delay in obtaining
    state funding for legal counsel via the
Rowbotham
application to be a
    discrete exceptional circumstance tied to the departure of the appellants
    lawyer, for which she deducted seven months and three days from the
Jordan
delay.

(iii)

The delay caused by the illness of the
    prosecuting Crown

[25]

The prosecuting Crown was hospitalized for an
    illness and the trial date was put off from October 8, 2015 to September 19,
    2016.

[26]

The Crown argued that the entire period of 11 months
    and 12 days should be deducted but the trial judge deducted only 7 months and 9
    days, recognizing that defence counsel would have been available to start the
    trial earlier than the judge and the Crown.

[27]

Before turning to complexity, the trial judge
    summarized her findings at para. 71 of her delay decision:

In summary, the total amount of time to be
    deducted from the 50-month delay as exceptional circumstances due to discrete
    events is 19 months and 8 days, and is comprised of the following time periods:

1.

Four months and 25 days in relation to the good
    faith underestimating of the time required to complete the preliminary
    inquiry, and unforeseen events during the course of the inquiry;

2.

Seven months and 4 days in relation to Mr.
    Earles
Rowbotham
application; and

3.

Seven months and 9 days in relation to the
    illness of Crown counsel.

This left a
Jordan
delay of
    30 months and 22 days, which was 22 days above the presumptive ceiling.

(iv)

Complexity

[28]

The trial judge concluded that the complexity of
    the prosecution could easily account for the remaining 22 days, bringing the
    delay for
Jordan
purposes to less than 30 months. However, the
    appellant argued that this was not a complex case.

[29]

The trial judge rested her finding of complexity
    on a combination of several factors: the voluminous disclosure; the very
    technical nature of the case as a large scale complex fraud alleged to have
    occurred over a substantial period of time; and the requirement for expert
    evidence. She also noted that, in order to accommodate the complexity, the
    Crown reconfigured the prosecution to bring fewer of the complainants in as
    live witnesses, saving trial time.

(v)

The transitional exceptional circumstance, and
Morin

[30]

The position of the Crown was that if the
    complexity of the case did not itself constitute an exceptional circumstance,
    then the time above the 30-month presumptive
Jordan
ceiling was
    justified as a transitional exceptional circumstance. The trial judge believed
    that this argument compelled her, following
Williamson
, to conduct a
    full assessment of the delay under the Morin guidelines.

[31]

After an exhaustive analysis, the trial judge
    concluded, at para. 136, that the total institutional delay is 12 months and 4
    days, which is well below the
Morin
guidelines. The remainder of the
    50-month delay is inherent or neutral. She added that there was no real prejudice
    to the appellant because he had been released on bail two days after his arrest
    and his bail conditions were not particularly stringent. The trial judge concluded
    that [g]iven the length of the delay, I infer that Mr. Earle has suffered some
    prejudice, and that his employment prospects were negatively affected by the
    bail condition prohibiting him from trading in securities and precious metals.
    She added, at para. 144: [a]ny prejudice to Mr. Earle is mitigated in
    part by the fact that most of the delay is attributed to the inherent time
    requirements of the case.

[32]

The trial judge concluded, at para. 161: Based
    on the
Morin
framework, there has been no infringement of Mr. Earles
    s. 11(b) right.

(c)

The principles applied

[33]

This is a case to which the transitional
    exceptional circumstance identified in
Jordan
plainly applies. Because
    the trial started so soon after the release of
Jordan
, within 10 weeks,
    this case did not require the intensive analysis under
Jordan
and then
    under
Morin
undertaken by the parties and the trial judge.

[34]

In my view, before the advent of
Jordan
,
    the parties reasonably relied on the law as it previously existed under
Morin
.
    The trial judge was right to conclude, at para. 163 of her reasons, that the
    release of
Jordan
shortly before trial meant the parties had no
    realistic opportunity  to adapt to the new framework, for which they had no
    notice.

[35]

The appellant made the same arguments before
    this court that he made at trial. He does not challenge the trial judges
    general approach, only her detailed calculations. In his view, the trial judge
    erred in categorizing state action during both the preliminary inquiry and the
Rowbotham
application as discrete events, although the appellant conceded that some
    of the seven-month delay due to Crown illness was a discrete exceptional event
    and therefore neutral. The appellant also conceded that about four months
    during the
Rowbotham
application could be considered neutral delay.
    But the appellant argued that this still left over 39 months delay, which is
    significantly above the presumptive ceiling of 30 months.

[36]

I disagree. The release of
Jordan
did
    not automatically transform what would previously have been considered a
    reasonable delay into an unreasonable one. In any event, I take no issue with
    the trial judges determinations and calculations under
Morin
, to
    which this court must defer. The appellant has not pointed to any palpable or
    overriding factual errors, or any errors of law that would warrant this courts
    interference. This ground of appeal should be dismissed.

(2)

The trial judge did not err in her assessment of
    the mental element of fraud

[37]

The appellant argues that the trial judge erred in failing to
    consider the fact that the appellant sought legal
advice
on GPMs operations as a factor to support his credibility and
to negate the mental element of fraud.

[38]

This argument must be set into its factual and
    evidentiary context.
In late 2007, as GPM began to
    experience financial difficulty, the appellant engaged the services of Frank
    Palmay of Lang Michener to review GPMs documentation and business practices. Mr.
    Palmay prepared a memorandum of opinion on the legal adequacy of GPMs
    documentation and the appellants way of carrying on business. For convenience
    I will refer to Mr. Palmay as the author. The memorandum was marked as a
    lettered exhibit for identification by the trial judge.

[39]

In the memorandum, the author set out what he
    understood to be a simplified version of the steps taken in the furtherance of
    this business, based on the information supplied by the appellant:

·

when a customer first approaches the company,
    the customer is asked to complete a New Client Application Form which contains
    Risk Factors and the Disclosure Statement both of which are signed by both the
    customer and the company and the companys representative which also contains
    the customer acknowledgement, again signed by both the customer and the
    company;

·

the customer can either pay the full price plus
    a 5% commission to the company for the precious metals purchased and take
    delivery of them or in lieu of delivery have the company store it at a[n]
    annual fee;

·

alternatively, and most if not all customers,
    choose this, a customer finances the purchase by paying 25% of the value of the
    metals (plus the companys commission) and maintains the margin based on the
    current price of the metal with a daily carrying charge per ounce (based on the
    metal)  in this case the storage charge mentioned in the previous paragraph
    does not apply;

·

included in the documentation provided to the
    customer (Account Fees) is a clear stipulation that the company is acting as
    principal and that the clients purchases are from precious metals of the
    companys inventory;

·

with one exception, none of the documentation
    that I have reviewed either states or, in my view, implies that either the
    funds received or any precious metals are held in trust for the customer  the
    one exception is if a customer pays for the metal and in lieu of taking
    delivery pays the company the annual storage fees to store it on its behalf;
    but I understand that this is not a practice that customers choose

[40]

The author made several statements regarding the
    businesss struggles in late 2007 and early 2008:

The business of the company was going along
    quite well until the company made a decision to trade metals on its own
    account. Initially these trades resulted in a gain of about $100,000 but more
    recently, as the price of silver increased unexpectedly, the losses are in the
    order of $300,000 and are subject to further fluctuation up and down depending
    on the price of silver

[41]

Under the heading Advice Given, the author
    gave this opinion:

Based on the facts as I understand them and
    based on my discussion with David Earle, it is my view that he sincerely and
    reasonably based on his past experience thought he was acting in the best
    interest of the company by embarking on the house account trades that caused
    the problem.
I can detect no mens rea (intent) that would
    expose him criminally
, which, of course, is one of the exclusions to the
    companys indemnity. [Emphasis added.]

[42]

The author advised the appellant that the
    corporate veil could be pierced: if a shareholder, especially a sole
    shareholder, treats the company as his/her alter ego. That is, the shareholder
    ignores the corporate veil and deals with the companys assets, bank accounts,
    etc., as if they were his/her own. The author then stated:
I understand from David Earle that this is not the case and
    that the only time the companys funds were paid to him were as reimbursement
    for expenses properly incurred by him for company purposes

(Emphasis
    added).

[43]

The author concluded the memorandum with a
    statement that there were ways in which the documentation could be tightened
    up.

(a)

The role of the memorandum at trial

[44]

The key strategic question at trial was whether
    the author should be called to give evidence about the memorandum and the
    information upon which it was based. Defence counsel sought to introduce the
    memorandum into evidence without calling the author. His argument was that the
    memo was admissible and could be relied on by the appellant to negate the mental
    element of fraud. The Crown objected on the basis that the memorandum was
    inadmissible hearsay without the authors testimony.

[45]

Defence counsel sought to thread the
    admissibility needle in such a way as to make use of the memo for the limited
    purpose of showing the basis for the appellants subjective intent. He said: [w]hat
    the [memorandum] is being tendered for is only to show exactly what Mr. Earle
    was told by his lawyer and its only relevant to the issue of what Mr. Earle
thought about his situation in the business

after having received that letter
 (emphasis added). The
    colloquy on admissibility lasted several days and consumed many pages of
    transcript.

[46]

The trial judge was eventually persuaded to
    allow the appellants examination in chief and cross-examination on the memo to
    proceed as a blended
voir dire
, leaving for later argument whether
    admissibility had been made out. The issue left to be briefed by counsel was
    whether the memo might be admitted as part of a mistake of law defence. Defence
    counsel had not had the opportunity to review the Crowns material on that
    issue and asked for more time to do so. The trial then adjourned for a month. When
    it resumed, defence counsel stated that he had reviewed the case law and if [the
    memo]s not relevant to the inquiry at this point, then Im not going to rely
    on it. The trial judge did not make a ruling on the admissibility of the memo
    and the trial continued, with the appellant testifying.

[47]

Before this court, the appellant acknowledged
    that a traditional mistake of law defence was not available but argued that
    the memo was relevant to the appellants state of mind and general credibility,
    more particularly whether or not he had subjective knowledge that his
    representations were false, and to his overall credibility in denying any
    fraudulent intent. Accordingly, the appellant argued, the trial judge erred in
    limiting her consideration of this evidence to a mistake of law defence.

[48]

I would not give effect to this ground of
    appeal. The trial judge was unequivocal in her finding that the appellant
    knowingly deceived his clients. The memorandum does little to change that
    finding, particularly in light of the indicators that the appellant may have
    deceived the author of the memorandum as well. As I will explain, the mental
    element of fraud does not require the Crown to prove the appellants subjective
    intent to deceive his clients. To the extent the memorandum shows the appellant
    had reasons to believe he acted honestly, it is not actually responsive to any
    of the elements of the offence of fraud.

(b)

The mental element of fraud

[49]

The appellant argues that it was an error of law
    for the trial judge to fail to consider the memo as a piece of circumstantial
    evidence in assessing the credibility of the appellants version of events and
    on the issue of the appellants
mens rea
. He argues that the fact
    that he spoke to counsel and obtained an opinion as to the structure and
    operation of GPM, and
the
    manner in which GPM was organized and functioned, suggests that he did not have
    a
n intention to deceive the complainants.

[50]

This argument rests on an erroneous
    understanding of the mental element for fraud under s. 380 of the
Criminal
    Code
: that the Crown must prove that the appellant subjectively appreciated
    the dishonesty of his acts. This understanding of the mental element is
    precisely what the Supreme Court rejected in
R. v. Zlatic
, [1993] 2
    S.C.R. 29, at p. 49:

As is pointed out in
Théroux
[
R. v. Theroux
[1993]
    2 SCR 5]
, released concurrently, fraud by other
    fraudulent means
does not
    require that the accused subjectively appreciate the dishonesty of his or her
    acts.
The accused must knowingly, i.e.,
    subjectively, undertake the conduct which constitutes the dishonest act, and
    must subjectively appreciate that the consequences of such conduct could be
    deprivation, in the sense of causing another to lose his or her pecuniary
    interest in certain property or in placing that interest at risk. [Emphasis
    added.]

This accused knew precisely what he was doing
    and knew that it would have the consequence of putting his creditors pecuniary
    interests at risk.

[51]

The point is stated succinctly in
R. v. Eizenga
, 2011 ONCA 113, 270
    C.C.C. (3d) 168, at para. 81:

[A] subjective intent to
    mislead is not an essential element of the offence of fraud
.
Instead, all that is required is
    subjective knowledge of the prohibited act, and that the act could have as a
    consequence the deprivation of another.

[52]

This is not the case in which to tease out the
    subtler nuances of the mental element of fraud because the evidence of the
    appellants intent to mislead his clients was overwhelming based on the trial
    judges findings, to which I turn in the next section. At best, the memorandum represents
    a lukewarm attempt to clean up GPMs affairs. At worst, as the trial judge
    appears to have concluded, it was an attempt to paper over the appellants
    conscious deceptions.

(c)

The trial judges dishonesty findings

[53]

Earlier I summarized the trial judges dishonesty
    findings, which I derived from her sentencing reasons, in which she said:

In my reasons for judgment, I found that Mr.
    Earle deliberately misled GPMs clients about the nature of the companys
    business in the following ways:

1. Mr. Earle conveyed to clients, including
    his former APM clients, that GPM possessed an inventory of physical precious
    metals when the company had no such inventory: Reasons for Judgment, at paras. 558-650.

2. Mr. Earle conveyed to clients that he
    was purchasing physical precious metal in accordance with their [permission to
    trade] PTT orders at the time that the orders were made: Reasons for Judgment,
    at paras. 651-655;

3. Mr. Earle led clients to believe that
    GPM was financing their precious metal purchases: Reasons for Judgment, at
    paras. 656-675; and

4. Mr. Earle failed to distinguish between
    the APM and GPM business models: Reasons for Judgment, at paras. 676-704.

[54]

In my view, the trial judges findings on the
    appellants manifest dishonesty negate any possible mitigating effect from what
    he understood his legal responsibilities to be after reading the memorandum.
    The memorandum did not accurately describe his business practices, suggesting
    the appellant did not provide full information to the author, in particular
    information about the permission to trade script that he used to trigger
    transactions.

[55]

For the trial judge, much turned on the permission
    to trade or PTT script that the appellant read to his clients when taking an
    order for precious metals. The script was taken from his previous employer, APM,
    and provided:

EARLE: This is David Earle with Global
    Precious Metals. Do I have your permission to tape record this call?

GPM client: Yes.

EARLE: Today's date is (insert date) at
    (insert time) Toronto time. The purpose of this call is to confirm your
    precious metals purchase and make certain that you have a full understanding of
    the program. Please state your name for the record.

GPM Client: name

EARLE: Okay (insert client's name). Today you
    are purchasing "Y" ounces of silver. The price is $X US per ounce.
    The total metal value is Y x $X US dollars. There is (percentage amount) for
    commission for this trade. Do you understand that you are only investing
    approximately (between twenty and twenty-five percent) of the total metal
    value?

GPM Client: Yes.

EARLE: If the equity in your position ever
    drops to approximately fifteen percent, you'd be required to bring your equity
    back up to twenty percent by making a deposit or liquidating your positions. Do
    you understand that for each day that you do not take delivery of your precious
    metals, you' II be charged a carrying fee of one half cent per ounce?

GPM client: Yes.

EARLE: Today you can take delivery of your
    precious metals at any time by paying off the unpaid balance. You'll receive a
    trade confirmation from us in the mail. If you have any questions, please feel
    free to call us. Do I have your permission to place this trade?

GPM client: Yes.

[56]

The script was identical to the APM script,
    except for the following addition in the GPM script: Do you understand that
    for each day that you do not take delivery of your precious metals, you will be
    charged a carrying fee of one half cent per ounce?

[57]

The trial judge was unable to accept the
    appellants asserted belief in his own honesty. Her assessment hinged largely on
    the difference between the purchase of actual precious metal and the purchase
    of a metal position on GPMs books that was not backed up by an inventory of
    metals.
As I noted earlier, the appellant acknowledged
    in his factum that: In general, the clients testified that they understood
    that the money they deposited with GPM had been used to buy physical silver. However,
    the trial judge found:

The complainants belief that they were
    purchasing physical metal was reinforced by the PTT script, which described the
    purpose of the call as being to confirm your precious metals purchase. There
    was no reference in the PTT script to purchasing metal positions or
    obligations. Mr. Earles refusal to characterize a PTT transaction as anything
    other than a sale of precious metals, and his insistence that he was selling
    clients physical precious metal when he never bought any metal, was
    self-serving and an attempt to justify the language that he used in the script,
    in GPMs materials, and in speaking to clients.

[58]

In her sentencing reasons, the trial judge
    observed:

It was clear from the evidence of the
    complainants that Mr. Earle never explained to them that what they were
    purchasing was a metal position. During his testimony, Mr. Earle admitted
    that he never disclosed to clients that GPM did not possess any metal. He also
    admitted that he never told clients that GPM did not buy any metal pursuant to
    their PTT orders. These omissions, in the circumstances, constituted the
    nondisclosure of important facts and were dishonest.

[59]

Could the memorandum have helped the appellant,
    as he now argues? It appears not from the trial judges reasons. She addressed
    the memorandum and found that it could not give the appellant the plausible
    deniability he sought with respect to the mental element of fraud. She
    expressly addressed the impact of the memorandum:

In my view, the issue of Mr. Earles reliance
    on his lawyers opinion would be problematic in any event because it is not
    known exactly what information Mr. Earle provided to the lawyer. In other
    words, it is not known whether the lawyer had the whole picture with respect
    to the nature of GPMs business, the oral representations that Mr. Earle made
    to clients in soliciting their business, and what he omitted to tell them.

For example,
it is not known whether Mr. Earle provided the lawyer with a copy of
    the PTT script
. Mr. Earle testified that he gave
    him all the materials that he sent to clients. However, that would not have
    included the script, which states that the purpose of this call is to confirm your
    precious metals purchase, and concludes with the question, Do I have
    permission to place this trade? The script made no reference to metal
    positions or obligations. [Emphasis added.]

It is not known whether Mr. Earle told his
    lawyer that despite the many references in GPMs materials to GPMs own
    inventory, he never disclosed to clients that GPM did not own any physical
    metal and did not purchase any metal pursuant to their orders. It is not known
    whether Mr. Earle told his lawyer that he clearly explained the carrying fee to
    clients. I have found that Mr. Earle gave no such explanation to his
    customers.

[60]

The trial judge summarized her conclusions on
    the fraud charge in her reasons for conviction:

In summary, I did not find Mr. Earle to be a
    credible or reliable witness. I do not believe his evidence that he did not
    purposely mislead clients as to the true nature of GPM's program. Mr. Earles
    evidence does not leave me with a reasonable doubt. After considering all of
    the evidence and the submissions of counsel,
I am
    satisfied beyond a reasonable doubt that Mr. Earle deliberately misled the
    complainants by implying that GPM had an inventory of physical metals and that
    metal was purchased in accordance with their orders
. Mr. Earle also used
    other fraudulent means by structuring his business to hide from the
    complainants the fact that metal would only be purchased if paid for in full.

[61]

As to the requirement for the Crown to prove
    deprivation, the trial judge found that:
There can be
    no doubt that Mr. Earle knew that by not purchasing metal with his clients
    deposits, he placed their money at a risk well beyond what they had agreed to.

[62]

Defence counsel attempted to resurrect the memorandum
    in sentencing submissions, arguing that reliance on legal advice ought to be
    considered a mitigating factor on sentence. The trial judge refused on the same
    basis as in her reasons for conviction. She noted in her sentencing reasons:

The difficulty with this submission is that
it is not at all clear from the lawyers
    letter what exactly Mr. Earle told him about the nature of GPMs business
. For example, explaining the companys business model would entail
    explaining that the client was purchasing a metal position, as opposed to
    physical metal, and that there was no financing involved. However, in his
    letter, the lawyer, in setting out the relevant facts as he understood them
    from Mr. Earle, states the companys business is as a dealer of precious
    metals (gold, silver, platinum, and palladium). The lawyer was also led to
    believe that in most cases, a customer finances the purchases by paying 25
    percent of the value of the metals, and that the clients purchases are from
    precious metals of the companys inventory. [Emphasis added.]

There is no indication in the lawyers letter
    that Mr. Earle discussed with him the fact that he never disclosed to clients
    that GPM had no inventory of precious metals, and that he never told them that
    no metal was purchased pursuant to their PTT orders  omissions that I found to
    be dishonest.

[63]

In my view, the trial judges findings on the
    appellants abuse of the PTT script and the fact that he did not give a copy of
    the script to the author fatally undermined the memorandums cogency on the
    issue of the mental element of fraud. I note as well the authors statement in
    the memorandum:
I understand from David Earle that  the only time the companys funds
    were paid to him were as reimbursement for expenses properly incurred by him
    for company purposes. This statement does not survive the
trial judges finding
that some of the
    money was used to finance other business transactions including highly
    speculative securities, the appellants gambling, and payments towards his
    personal credit card debts.

[64]

In short, the trial judge did not misapprehend
    the relevance and usefulness of the memorandum in assessing whether the Crown
    had proven the mental element of fraud on the appellants part. The evidence of
    the appellants fraud was overwhelming. It is reinforced by the appellants
    affidavit on the ineffective assistance of counsel argument, to which I now
    turn.

(3)

The assistance of trial counsel was not ineffective

[65]

The
    appellant argues that he received ineffective assistance from trial counsel. I
    address this argument after setting out the governing principles.

(a)

The governing principles

[66]

The
    procedure for advancing a claim that trial counsel provided ineffective
    assistance is well known.
The rules are set out in the
Practice Direction Concerning Criminal Appeals at the Court of
    Appeal for Ontario
, dated March 2017 (formerly the
Protocol Regarding Allegations of Incompetence of
    Trial Counsel in Criminal Cases
). The burden rests
    on the appellant to establish: the facts on which the claim is based; the incompetence
    of the representation; and that the incompetent representation resulted in a
    miscarriage of justice. See
R. v. Joanisse
(1995), 102 C.C.C. (3d) 35, [1995] O.J. No. 2883,
per
Doherty J.A., at para. 69.

[67]

The appeal record on a claim for ineffective assistance of counsel
    typically includes the affidavit and cross-examination of trial counsel. While
    the
Practice Direction
does not specifically require it, an affidavit
    is expected because it will almost certainly become the central document in any
    ineffective assistance claim:
R. v. Archer
(2005), 202 C.C.C. (3d) 60,
    [2005] O.J. No. 4348,
per
Doherty J.A., at para. 165.

[68]

Either the Crown or the defence might elicit
    trial counsels affidavit. However, as Doherty J.A. explained in
Archer
,
    at para. 164, basing himself on the prior
Protocol
, this responsibility
    will often fall to the Crown as a practical matter because trial counsel is not
    a party to the appeal. Part of the courts concern is to ensure that trial
    counsel whose professional conduct is being impugned has an opportunity to
    explain the strategic and other decisions made during the course of the trial. Doherty
    J.A. explained in
Archer
, at para 165:

The Protocol contemplates that the court will
    have before it all available information relating to the allegations of
    ineffective assistance of trial counsel.
Trial
    counsels version of the relevant events is obviously crucial
. This
    court expects that trial counsel will fully address the allegations made by the
    appellant. [Emphasis added.]

[69]

However,
    the Crown is not compelled to seek out and file trial counsels affidavit.
To the contrary, an appellants failure to fully engage in the
    process established by the
Practice Direction
permits the court to
    draw an adverse inference about the true value of the evidence that the
    appellant argues would have changed the course of the trial. The appellants
    reluctance to follow the procedure can be seen as an admission that the more
    robust fact-finding process of the
Practice Direction
, including an
    affidavit by trial counsel and cross-examination, might weaken rather than
    strengthen the claim of ineffective assistance:
R. v. Elliott
(1975), 28 C.C.C. (2d) 546, [1975] O.J. No. 1185 (C.A.),
per
Kelly J.A., at para. 6.

(b)

The principles applied

[70]

The appellant has not supplied an affidavit from
    trial counsel or a will-say statement from the author of the memorandum. He has
    only provided his own affidavit and the authors memorandum. The appellant
    pointed out that he was not cross-examined on his affidavit, to which the Crown
    filed no responding materials, implying that his version of events must
    therefore be accepted by this court.

[71]

I disagree. In his affidavit, the appellant states
    that he was surprised and upset when defence counsel decided not to call the
    author of the memorandum as a witness. He asserts that he repeatedly asked
    trial counsel to reconsider and to call the author as a witness but trial
    counsel refused.

[72]

Seen in context, t
he appellants
    affidavit is revelatory. In it, he recounts a conversation with trial counsel, in
    which he says he pressed his request to have the author testify.
The reason trial counsel gave, which the appellant quotes, is
    telling: [Trial counsel] said that since Mr. Palmay did not know about the PTT,
    there was no reason to call him.

[73]

The difficulty for the appellant is that, as noted earlier, the PTT
    script played a critical role in the trial judges reasons for conviction
    because it substantiated the appellants clear dishonesty to both his clients
    and to the author of the memorandum. Given that he did not provide a copy of
    the PTT script to the lawyer in seeking the legal opinion as to the adequacy of
    his business practices, introducing the lawyer as a witness would have
    highlighted the appellants catastrophic omission. Put another way, I suspect
    that the appellant has not provided the authors will-say on appeal for the
    same reason that the author was not called at trial: the author would only
    testify that the memorandum was based on incomplete information.

[74]

In my view, this is a case in which this court can and should draw
    an adverse inference against the appellant for failing to file trial counsels
    affidavit and a will-say statement from the author of the memorandum. His
    failure to produce materials that are routinely filed in ineffective assistance
    claims leaves the strong impression that those materials would have been more
    harmful than helpful to his case. I would dismiss the appellants claim that he
    was ineffectively assisted by trial counsel.

(4)

The Sentence Appeal

[75]

The appellant does not appeal the three-year
    custodial element of the sentence but the quantum of the restitution order in
    the amount of $986,128.71, a fine in lieu of forfeiture in the same amount, and
    the $200 victim fine surcharge.

[76]

The appellant argues that the restitution order,
    properly calculated to take account of several factors including the investors
    ability to take advantage of capital losses on their income taxes, should be
    reduced from $986,128.71 to $502,454.36, as should the amount of the fine. The
    appellant offered no evidence in support of this re-calculation. There is no
    factual basis on which to disturb the trial judges calculation of the losses
    suffered by the clients.

[77]

The Crown agrees that the victim fine surcharge
    must be set aside. Accordingly, I would grant leave to appeal sentence and
    would otherwise dismiss the sentence appeal except for the victim fine
    surcharge.

Released: January 20, 2021 JCM

P. Lauwers J.A.

I agree. J.C. MacPherson J.A.

I agree. M. Tulloch J.A.