R v Rafilovich: Using Proceeds of Crime to Pay for Defence Lawyers

In November, the Supreme Court of Canada (“SCC”) released its decision in R v Rafilovich, 2019 SCC 51 [Rafilovich], addressing the application of provisions of the Criminal Code, RSC 1985, c C-46 [Code] that prevent offenders from profiting from their crimes—known as the proceeds of crime regime. The Court was tasked with determining whether offenders who paid for their defence lawyers using money they had obtained from criminal activity could be made to repay the money to the Crown after their case finished. In a strong decision upholding the constitutional rights of accused persons, the SCC majority emphasized the necessity of legal representation to protecting the presumption of innocence, and held that fines should generally not be imposed in such circumstances.

Overview: Proceeds of Crime Regime

The Code contains a “comprehensive and distinct legal regime to address proceeds of crime,” which was intended to ensure offenders do not profit from crime (Rafilovich, para 2). According to this regime, the state can seize property believed to be proceeds of crime, which is held until a future sentencing hearing (Rafilovich, para 3). This creates a potential problem—many accused persons, while still legally innocent, would have limited access to their property and might not be able to afford legal representation without it (Rafilovich, para 3). However, the seized property is still considered theirs, which often “effectively disqualifies them” from receiving legal aid, even though they are unable to access the seized property (Rafilovich, para 65). The government thus created a process to allow accused persons “to seek the return of some or all of the seized property for certain designated purposes, including ‘reasonable legal expenses’ if the accused has ‘no other assets or means available’” (Rafilovich, para 4; Code, s 462.34(4)). During this process, hearings are held early in a criminal proceeding, and evidence is advanced for the judge to determine whether the accused needs the seized property to pay for legal fees, what amount may be returned, and the appropriate terms of the return. If applicable, the returned funds are “normally held in trust by legal counsel, to be used only for the defence of the accused” (Rafilovich, para 4). Then, during the main criminal proceedings, the sentencing judge will determine whether any portion of the offender’s property “has been proven to be proceeds of crime” (Rafilovich, para 5). This portion must then be forfeited to the Crown. If the property itself is not available for forfeiture—typically, if the money has already been spent or given away—the sentencing judge may order a fine in place of forfeiture, “equal to the amount proven to be proceeds of crime” (Rafilovich, para 6).

Rafilovich deals with the question, before the SCC for the first time, of “when, if ever, a sentencing judge should use the statutory discretion to order a fine instead of forfeiture in respect of property that was used, with prior judicial authorization, to pay for the reasonable costs of an accused’s legal defence” (Rafilovich, para 7).

Facts & Judicial History

When Mr. Rafilovich was arrested for possession of cocaine for the purposes of trafficking, the police searched his car and apartments and seized $42,000 in cash as potential proceeds of crime (Rafilovich, para 12). Before his trial, his lawyers brought an application to return some of the seized money to pay for legal fees associated with the case (Rafilovich, para 13). The judge granted his application (Rafilovich, para 13). After Mr. Rafilovich pleaded guilty, the Crown sought a fine instead of a forfeiture, equal to the amount of money returned to Mr. Rafilovich to pay for his legal counsel (Rafilovich, para 15). The judge did not impose a fine, finding that it was necessary for the funds to have been returned in order to pay for Mr. Rafilovich’s legal counsel, he did not benefit from the funds apart from legal representation, and, moreover, non-payment of the fine would lead to an additional term of imprisonment that offenders with “access to funds or legal aid would not have to face” (Rafilovich, para 15).

On appeal, the Ontario Court of Appeal (“ONCA”) overturned the sentencing judge’s decision not to impose the fine, holding that judges cannot exercise their discretion in a way that “hinder[s] the achievement of the objectives that the proceeds of crime regime seeks to achieve” (Rafilovich, para 16). The ONCA found that by utilizing the funds to pay his legal fees, Mr. Rafilovich had profited from the proceeds of his crime, so it imposed a fine equal to the amount of the seized and returned funds (Rafilovich, paras 16, 18).

SCC Majority Decision

Writing for the majority, Justice Martin restored the sentencing judge’s exercise of discretion, holding that, generally, the proceeds of crime regime should not require an accused person to repay their returned funds used to pay for legal fees. In discussing the proceeds of crime regime, Justice Martin first reviewed the underlying purposes of the scheme. Drawing on its legislative history, she concluded that while Parliament “was clearly motivated by the desire to remove the financial incentive from certain crimes, it also wanted to ensure that accused persons would have access to legal representation and that the presumption of innocence would be protected, in order to maintain a procedure that is fair to the accused” (Rafilovich, para 49). These “secondary purposes,” she found, must inform the interpretation of the primary objective of ensuring offenders do not profit from crime (Rafilovich, para 49). Consequently, the objective of ensuring crime does not pay cannot overshadow the presumption of innocence and access to legal counsel.

With this in mind, Justice Martin disagreed with the Crown’s assertion that “unless the judge imposes a fine instead of forfeiture for amounts returned for legal fees, the accused benefits in a manner that undermines the goals of forfeiture,” and that “the return provision was meant to provide only interim relief to an accused person, to be recouped later as a fine instead of forfeiture” (Rafilovich, para 52). She held that this interpretation undermines the secondary purposes of the return provision, and “fails to properly balance the rights and interests” at play (Rafilovich, para 54).

According to Justice Martin, if the Crown’s interpretation were accepted and “the return order is viewed as a loan, and a fine instead of forfeiture is imposed on judicially returned funds as a matter of course, then the accused’s ability to access legal counsel is largely illusory” (Rafilovich, para 55). Accused persons may choose not to seek the return of funds for fear of a later fine or imprisonment, meaning that “instead of facilitating an accused person’s access to legal counsel, the provision would do precisely the opposite: it would dissuade accused persons from accessing legal representation” (Rafilovich, para 55). Further, she explained that “[w]hen an accused person cannot access legal counsel, the presumption of innocence suffers,” as accused persons are left without defence counsel to assist them navigating the criminal justice system (Rafilovich, para 56). Importantly, she stated that the presumption of innocence does not retroactively diminish when an accused person is found guilty:

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 (Rafilovich, para 57).

Consequently, she held that imposing a fine in such circumstances would undermine the presumption of innocence and access to legal representation. 

Finally, Justice Martin addressed the Crown’s argument that Mr. Rafilovich “received a ‘benefit’—the payment of his legal fees—that he must be deprived of through the imposition of a fine instead of forfeiture in order to uphold the purpose of the proceeds of crime regime” (Rafilovich, para 62). She held that while access to funds for legal representation may be a form of benefit in some ways, it “is not the type of benefit that Parliament sought to take away from offenders by way of a fine” (Rafilovich, para 64). Instead, she found that the existence of the return provision indicated that Parliament intended offenders to have access to this option (Rafilovich, para 64). She concluded with a significant proclamation about the purposes of the criminal justice system, writing:   

It is undeniable that because Mr. Rafilovich used the returned funds to finance his legal defence, there is less money available to be forfeited to the Crown.  But this by-product of accused persons exercising their rights is not unusual. 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. (Rafilovich, para 68).

Ultimately, Justice Martin concluded that given the purposes of the statutory regime, generally, “a fine instead of forfeiture should not be imposed on funds that have been judicially returned for the payment of reasonable legal expenses” (Rafilovich, para 85). However, she noted that there may be times where a fine is reasonable, such as cases in which “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” (Rafilovich, para 85). In Mr. Rafilovich’s case, there was no evidence that he “misrepresented his financial position, misused the returned funds, or experienced any change in circumstances,” and therefore no reason to impose the fine (Rafilovich, para 86). 

SCC Dissenting Opinion

Justice Moldaver, writing for three members of the Court, rejected Justice Martin’s purposive interpretation of the proceeds of crime regime. He explained that “[s]tripped 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” (Rafilovich, para 92). Instead, he argued that “[i]mposing 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” (Rafilovich, para 92). However, he held that there was “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” (Rafilovich, para 93). Essentially, when a sentencing judge determines that legal representation is necessary to “the offender’s constitutional right to a fair trial under ss. 7 and 11(d) of the Canadian Charter of Rights and Freedoms [Charter], the judge should exercise his or her limited discretion not to impose a fine in lieu in respect of the released funds” (Rafilovich, para 93). In doing so, Justice Moldaver argued that Parliament’s intent to prevent offenders from profiting from crime could be properly balanced with the right to counsel.

Analysis

The SCC majority’s decision does an effective job at balancing the competing interests and rights at stake, while attempting to give full effect to the underlying intent of the proceeds of crime regime. By emphasizing the presumption of innocence, Justice Martin’s decision ensures that the statutory regime safeguards accused persons’ Charter protections above all else. Her explanation of the impact of such retroactive fines on access to counsel and the presumption of innocence is undoubtedly correct—if accused persons knew that they might have to repay enormous sums of money if they were found guilty, many might choose to forego legal representation and attempt to navigate the criminal justice system independently. Self-representation indisputably places accused persons at a disadvantage; as Justice Martin recognized, “defence counsel help to ensure that the case remains the Crown’s to prove” (Rafilovich, para 56). Forcing accused persons into either going without legal representation or risking having to repay significant amounts of money is “no real choice at all” (Rafilovich, para 60). Consequently, adopting Justice Martin’s approach ensures that the proceeds of crime regime does not prevent accused persons from accessing legal counsel.

Justice Moldaver’s proposal to only prohibit fines where representation is deemed necessary to the case minimizes the difficulty of navigating the criminal justice system without representation. While judges are required to draw distinctions in some cases, as in determining where there is a constitutional right to state-funded counsel (Rafilovich, para 134), the reality is that depriving any accused persons of the choice to access counsel significantly impacts their capacity to defend themselves against criminal charges. Further, as Justice Martin notes, applying the restrictive test for when the state is constitutionally mandated to fund counsel to situations where the state may be required to return private property to fund counsel imports a very high threshold requirement into an entirely different context (Rafilovich, para 81). This approach is not only legally inconsistent; it also places a significant limitation on the rights of accused persons to access counsel. Given these flaws in Justice Moldaver’s dissent, it is a relief that the majority of the Court sided with Justice Martin’s purposive and Charter-protective approach to the proceeds of crime regime.