2022 BCCA 339 R. v. Scholz.mhtml
COURT OF APPEAL FOR BRITISH COLUMBIA
R. v. Scholz,
2022 BCCA 339
Michael Curt Helmut Scholz
The Honourable Madam Justice Stromberg-Stein
The Honourable Mr. Justice Hunter
The Honourable Mr. Justice Marchand
On appeal from: An order of the Provincial Court of British Columbia, dated
February 24, 2021 (sentence) (R. v. Scholz, Vancouver Docket 1037-3-C).
Oral Reasons for Judgment
Counsel for the Appellant:
M.P. Klein, K.C.
Counsel for the Respondent:
Place and Date of Hearing:
Vancouver, British Columbia
September 26, 2022
Place and Date of Judgment:
Vancouver, British Columbia
September 26, 2022
The appellant appeals a 29-month imprisonment sentence for convictions related to fraudulent GST/HST rebate claims contrary to the Excise Tax Act and the Criminal Code. The appellant alleges the sentencing judge erred in principle in failing to impose a conditional sentence, in assessing his personal circumstances, and in assessing the impact of COVID‑19 if he were imprisoned. Held: Appeal dismissed. The judge did not err in principle. The judge crafted a fit sentence based the relevant factors and sentencing principles and properly gave weight to denunciation and deterrence, given the appellant’s moral blameworthiness. The global sentence of 29 months’ for a substantial tax fraud is entirely fit in the circumstances.
 The appellant, Michael Curt Helmut Scholz, was convicted by a Provincial Court judge on June 18, 2020, of three counts of violating the Excise Tax Act, R.S.C. 1985, c. E‑15 [ETA], and two related counts of uttering forged documents contrary to the Criminal Code, R.S.C. 1985, c. C‑46: R. v. Scholz, 2020 BCPC 120. These offences relate to unlawful claims Mr. Scholz made for input tax credits in connection with the construction of his “dream home”. The forgery offences relate to two documents Mr. Scholz presented to the Canada Revenue Agency (“CRA”) to attempt to legitimize his rebate claims and lessen his tax liability. Mr. Scholz’s conviction appeal was dismissed on April 1, 2022: R. v. Scholz, 2022 BCCA 129.
 Mr. Scholz was sentenced on February 24, 2021: R. v. Scholz: (24 February 2021), Vancouver 1037‑3‑C (B.C.P.C.). The Crown sought a global sentence of 36 months and mandatory minimum fines. Mr. Scholz sought a 16‑month conditional sentence and did not oppose the mandatory minimum fines. The judge entered a conditional stay on Count 1 pursuant to R. v. Kienapple,  1. S.C.R. 729. For the remaining offences, Mr. Scholz was sentenced to a total 29‑month term of imprisonment and fined $644,975.71 as follows: Count 2, failure to remit tax, contrary to s. 327(1)(c) of the ETA: nine months and a fine of $121,862.94; Count 3, failure to remit tax, contrary to s. 327(1)(d) of the ETA: 16 months consecutive and a fine of $523,112.77; Count 4, forgery, contrary to s. 368(1)(d) of the Criminal Code: four months concurrent; Count 5, forgery, contrary to s. 368(1)(b) of the Criminal Code: four months consecutive.
 On this sentence appeal, Mr. Scholz submits the judge erred in principle in failing to impose a conditional sentence, in assessing his personal circumstances, and in assessing the impact of COVID‑19 if he were imprisoned. Mr. Scholz has paid the fines and all associated fees and penalties.
Circumstances of the Offences
 The offences took place between December 2009 and November 2013. In August 2009, Mr. Scholz and his then‑wife, Carolyn Scholz, set out to build their “dream home” at 1071 Groveland Road, West Vancouver (the “Property”). Their intention was to move into the house.
 Prior to their involvement, the registered owner of the Property was “1071 Groveland Properties Ltd.”, which held the property in trust for another company. Using Mr. Scholz’s funds, Carolyn Scholz purchased 100% of the shares of 1071 Groveland Properties Ltd. and transferred to herself 100% of the beneficial interest in the Property. After these transfers, Carolyn Scholz was 100% owner of 1071 Groveland Properties Ltd., which held the Property as bare trustee for Carolyn Scholz as the sole beneficiary. This arrangement was structured to provide protection from Mr. Scholz’s potential creditors.
 The ETA permits registered or beneficial owners of a property to claim GST rebates, called input tax credits (“ITCs”), on the purchase of goods and services used toward constructing a home they intend to sell. Mr. Scholz was neither the registered nor beneficial owner of the Property, but as soon as construction on the Property began in 2010, he began claiming ITC rebates.
 The initial cost estimation of the home was $3 million dollars. Carolyn Scholz was placed in charge of supervising the general contractor and architect/designer. By November 2010, the anticipated costs had grown to over $6.1 million dollars.
 In 2011, the CRA advised Mr. Scholz he could not claim GST rebates unless he could show he had title to the Property or was a legitimate beneficial owner. In October 2011, Mr. Scholz created and provided to the CRA a document backdated to August 2010, declaring the Property was held in trust for himself and Carolyn Scholz equally.
 On January 9, 2013, the CRA informed Mr. Scholz his ITC rebate claims were being rejected. The CRA informed him he may be liable to pay GST on the Property’s fair market value, which was appraised at $6.8 million. Mr. Scholz then executed and provided to the CRA a forged trust document backdated to August 2009, declaring himself the sole beneficial owner of the Property.
 In an effort to reduce the Property’s fair market value, in October 2013, Mr. Scholz created a false lease agreement between himself as tenant and the company as landlord, indicating Mr. Scholz had entered into a 20‑year tenancy on the Property when it was purchased. He told the CRA the lease reduced the Property’s value and had not been accounted for in the CRA’s $6.8 million appraisal.
Circumstances of the Offender
 Mr. Scholz was 66 years old at the time of sentencing, and is now 68 years old. He has no prior criminal record.
 Mr. Scholz was born in Vancouver. He states his early years were difficult; his mother suffered from mental health issues, and his father left the family when Mr. Scholz was approximately 12 years old.
 After completing high school, Mr. Scholz attended the University of British Columbia where he studied commerce and law. He practiced corporate law in Vancouver for approximately 23 years, dealing with corporate mergers and commercial leasing, and was a senior partner before changing careers and going into business. Letters of support before the sentencing judge indicate he is well regarded by colleagues and friends.
 At the time of sentencing, Mr. Scholz owned multiple businesses and was involved in the day‑to‑day operations of two commercial rental buildings and a Whistler hotel. Collectively, he said he employed over 160 people, including family members and his former wife, Carolyn Scholz. Mr. Scholz states the COVID‑19 pandemic has had a devastating impact on these businesses, and he has incurred loans in excess of $1 million to allow the businesses to continue to operate.
 Mr. Scholz married his second wife, Carolyn, in 1999. He has four children from a first marriage and two children with Carolyn Scholz. Mr. Scholz and Carolyn Scholz were separated at the time of sentencing, but remain close and maintain a positive relationship for the benefit of their family and shared businesses. Mr. Scholz maintains the stress associated with the CRA’s investigation and charges contributed significantly to the breakdown of his marriage to Carolyn Scholz.
 The judge reviewed a number of case authorities to determine an appropriate sentencing range. In some cases, a conditional sentence was imposed. The judge recognized a conditional sentence could be imposed if the court first decides a sentence of less than two years is appropriate. In considering the circumstances of the offenses and offender in this case, the judge determined a conditional sentence was not available.
 In determining a fit sentence in this case, the judge weighed the relevant aggravating and mitigating factors. He considered as mitigating factors Mr. Scholz’s lack of criminal record; his strong network of support; the public and personal humiliation of his conviction; and the detrimental impact incarceration may have on his employees.
 The judge identified a number of aggravating factors, including Mr. Scholz’s extensive experience as a commercial lawyer involved in complicated business. The judge noted this was a tax fraud involving a substantial amount of money that had occurred over a number of years and that Mr. Scholz persisted, even when confronted by the CRA, by providing two forged documents. His crimes were motivated by greed and the judge found Mr. Scholz thought he was smart enough to get away with it.
 After accounting for Mr. Scholz’s personal background and moral culpability, the judge emphasized that “general deterrence to other like‑minded individuals, must be an overriding concern in these tax evasion cases”. The judge noted this overriding concern was particularly important in the context of Mr. Scholz’s case given the tax system relies on honest self‑reporting to function. In keeping with the principles of proportionality and totality, and with due consideration to a global sentence, the judge imposed a lesser sentence than may have otherwise been warranted for the forgery charges.
 The judge was unable to accept, without further support for the claim, a medical opinion from Mr. Scholz’s doctor that “the risk of contracting COVID‑19 for a man in his 60s in prison is increased by as much as 100 percent over the broader community”. The judge found that COVID‑19 could be considered a “collateral effect” of sentencing, but not one that would significantly lower the sentence in this case given the insufficient evidence demonstrating Mr. Scholz’s particular vulnerabilities.
 After considering the relevant circumstances and sentencing principles, and analyzing the jurisprudence, the judge concluded a 29‑month global jail sentence was a fit sentence.
Was there an error in principle that impacted the sentence?
 Mr. Scholz submits the sentencing judge erred in principle, warranting appellate intervention:
- in failing to consider the principle of restraint codified in s. 718.2(d) and (e) of Criminal Code, and in holding that a conditional sentence was not available to him;
- in holding that a properly structured conditional sentence could not have a deterrent effect;
- in finding that the public and professional humiliation Mr. Scholz suffered needed to be “exceptional” to be mitigating;
- in finding the offences were “planned” and “sophisticated”;
- in finding Mr. Scholz’s background as a lawyer and a person with experience in business rendered his conduct more aggravated than those without such a background; and
- in finding Mr. Scholz’s medical evidence was insufficient to establish that he was at risk from COVID‑19 should he be incarcerated.
Standard of Review
 R. v. Lacasse, 2015 SCC 64, and R. v. Friesen, 2020 SCC 9, emphasize the limited basis for appellate intervention in sentencing. An appellate court may not intervene to vary the sentence unless the sentencing judge made an error in principle that had an impact on the sentence or the sentence is demonstrably unfit: Lacasse at paras. 41–44; Friesen at para. 26. An error in principle includes an error of law, a failure to consider a relevant factor, or erroneous consideration of an aggravating or mitigating factor: Friesen at para. 26. The weighing or balancing of factors can form a material error in principle only if the trial judge exercises his or her discretion unreasonably: Friesen at para. 26; citing R. v. McKnight (1999), 135 C.C.C. (3d) 41 (Ont. C.A.) at para. 35.
Did the judge err in not imposing a conditional sentence?
 Mr. Scholz submits the judge erred by finding a conditional sentence was not available to him, and could not have a deterrent effect. He primarily relies on R. v. Proulx, 2000 SCC 5, as establishing that conditional sentences can have a deterrent effect.
 Section 742.1 of the Criminal Code is clear that a conditional sentence is available only where a court imposes a sentence of imprisonment of less than two years.
 The task before the sentencing judge was to determine a fit sentence. The judge was live to the purpose and principles of sentencing, including the principles of restraint in s. 718.2(d) and (e) of the Criminal Code. The judge reviewed the case authorities provided by counsel to determine an appropriate sentencing range. Some cases imposed a conditional sentence. The judge recognized a conditional sentence could be imposed if the court first decided a sentence of less than two years was appropriate. In considering the circumstances of the offenses and offender in this case, the judge determined a conditional sentence was not available. Paragraph 36 of his reasons summarizes why the judge felt a sentence in excess of two years, namely 29 months’ incarceration, was fit: the crimes were committed in a sophisticated way; Mr. Scholz’s personal background; his moral culpability; the planning and period over which the offenses were committed; the applicable case law; and the principles of totality, proportionality and restraint.
 Having properly made this determination, it was no longer relevant whether a conditional sentence could have a deterrent effect in Mr. Scholz’s case.
 In my view, the judge did not err in his approach.
Did the judge err in weighing personal circumstances?
Public and Professional Humiliation
 Courts have recognized that the publicity attached to the charging, trial, and conviction of an offender can be devastating, particularly for a person of previous good character who had a position of responsibility in the community: R. v. Schiegel,  O.J. No. 971 (Ont. C.A.) at para. 6. In some cases, courts have found that public humiliation can be a mitigating factor when it serves a denunciatory function that has a particular impact on the offender: See R. v. Heatherington, 2005 ABCA 393; R. v. Deck, 2006 ABCA 92.
 Mr. Scholz submits the sentencing judge erred in finding that the public and professional humiliation he suffered needed to be “exceptional” to be mitigating. In my view, this argument mischaracterizes the sentencing judge’s reasons and misinterprets R. v. Kodimyala, 2020 BCCA 275, which the judge considered.
 Kodimyala clarified that there is an “ordinary” amount of public humiliation and stigma that attaches to a fraud conviction as a normal consequence of committing such an offence. Some of the consequences of a fraud conviction for a person of previous apparently good character can be: loss of reputation; loss of job; shame; financial ruin; and loss of house: Kodimyala at para. 29, citing R. v. Zenari, 2012 ABCA 279 at para. 8. Without more, a sentencing judge should not consider the presence of these factors “exceptional”: Kodimyala at para. 31. In Kodimyala, the court found the sentencing judge had erred in principle by considering the ordinary as exceptional. Many of the factors considered by the judge to justify a non‑custodial sentence were nothing more than the normal consequences of fraud.
 In Mr. Scholz’s case, the sentencing judge did not find that Mr. Scholz’s public humiliation needed to be exceptional to be mitigating. I agree with the Crown that the judge properly instructed himself on the limited weight to place on collateral consequences to Mr. Scholz’s reputation when considering a fit sentence for his tax fraud offences.
 In my view, the judge did not err in his approach.
Background and Planning
 Mr. Scholz submits the judge misapprehended the evidence in finding that the offences were “planned” and “sophisticated”. He maintains it is apparent that the forged documents were “created in a slap dash fashion suggesting anything but planning and sophistication”. Further, he submits that the fact he was formerly a lawyer and a good businessman were “at best irrelevant” and “given the slap‑dash nature of the documents he created, it cannot be said that [he] in any way utilized legal knowledge or skill”.
 In my view, Mr. Scholz’s arguments amount to a disagreement with the judge’s findings and the weight and priority he gave to aggravating and mitigating factors, which is assessed on a standard of reasonableness: Lacasse at paras. 11, 41, 44. The sentencing judge was best placed to assess the impact of the circumstances and factors, and this assessment does not attract “microscopic appellate scrutiny”: R. v. Bosco, 2016 BCCA 55 at para. 25.
 It was open to the judge to find that “the crimes were committed out of greed and [Mr. Scholz] thought he was smart enough he could get away with it”. The “planning” referred to the fact that the offences took place over a period of more than three years. It was open to the judge to consider Mr. Scholz’s background and experience and to assess his moral culpability bearing those factors in mind. That Mr. Scholz made poor use of his knowledge and skills in committing the offences and got caught does not make it an error for the sentencing judge to consider his expertise as a relevant aggravating factor.
 In my view, the judge did not err in his approach.
Did the judge err in consideration of COVID-19?
 Mr. Scholz submits the judge erred in finding his doctor’s evidence was insufficient to establish that if incarcerated he was at risk from COVID‑19. The doctor referred to Mr. Scholz being vulnerable, having previously had pneumonia. The judge rejected a portion of the doctor’s opinion evidence and concluded that the concern of exposure to COVID‑19 while incarcerated was not a factor that would significantly lower his sentence. During oral submissions the judge took judicial notice of the fact that, “people with older ages and people with underlying conditions are either more susceptible to get [COVID‑19] or more serious than others.” He concluded, however, based on the evidence before him of Mr. Scholz’s health, that the risk to Mr. Scholz of contracting COVID‑19 did not reflect the same degree of potential harm as that of the offender in R. v. McKibbin, 2020 BCCA 337, where the doctor provided a letter indicating his patient suffered from a severe respiratory disease making him vulnerable to significant health consequences or even death if he contracted COVID‑19: McKibbin at para. 16. The judge further noted the comments of Justice Ker in R. v. Milne, 2020 BCSC 2101, at para. 134, that in the absence of concrete evidence of significant risk to an offender’s physical health, the fact of COVID‑19 on its own will not result in the reduction of the length of a custodial sentence and the matter is better left to the custodial authorities.
 While recognizing the hardship that can be caused due to COVID‑19, courts are not prepared to interfere with a fit sentence in the absence of evidence regarding the particular circumstances of an offender’s incarceration or any indication of a unique or personal vulnerability of the offender: McKibbin; Milne; R. v. Morgan, 2020 ONCA 279; R. v. Lariviere, 2020 ONCA 324. In R. v. Stevens, 2020 BCPC 104, the judge noted the risk of COVID‑19 can be best characterized as a collateral consequence, not mitigation, and the impact of a collateral consequence does not displace the general rule that a sentence must be fit, having regard to the crime and the offender: Stevens at paras. 47, 49.
 I would also note the comments of Justice Fitch in R. v. May, 2018 BCCA 391, recognizing an offenders’ age and ill health may be considered in determining a fit sentence, and considering whether a reduction in a prison sentence is warranted in the context of an offender’s age and ill health and need for treatment:
 In deciding whether to reduce a sentence due to an offender’s poor health, an appellate court must balance compassion with the seriousness of the offence: R. v. Babcock, 2013 BCCA 368 at para. 12. Importantly, there is no evidence before us suggesting that the Correctional Service of Canada is unable to treat the appellant’s medical conditions appropriately pursuant to their statutory obligations under ss. 85-87 of the Corrections and Conditional Release Act, S.C. 1992, c. 20 [“CCRA”]. Generally speaking, an appellate court will not interfere with a sentence on medical grounds where there is no evidence that correctional authorities will be unable to provide proper treatment: R. v. H.S., 2014 ONCA 323 at para. 38; R. v. Auckland, 2018 BCCA 171 at para. 28. Additionally, the appellant may become eligible for early parole if his health deteriorates to the extent contemplated by s. 121(1) of the CCRA.
 In my view, the judge did not err in his approach. The judge properly weighed and considered the relevant evidence, circumstances and jurisprudence in considering the impact of COVID‑19 on Mr. Scholz. He found the fear of COVID‑19 was a factor to consider but not a significant factor to lower an otherwise fit sentence. The weight the sentencing judge gave to the threat of COVID‑19 in light of the particular vulnerabilities of Mr. Scholz attracts deference from this Court absent any palpable and overriding error: Lacasse at para. 182. Mr. Scholz has not demonstrated any such error in the sentencing judge’s reasons.
 Mr. Scholz is not suggesting a 29‑month sentence is demonstrably unfit. Nor could he as the judge properly considered all the relevant factors and sentencing principles. He properly gave weight to denunciation and deterrence, given Mr. Scholz’s moral blameworthiness. The global sentence of 29 months’ for a substantial tax fraud is entirely fit in the circumstances.
 I would dismiss the appeal.
 HUNTER J.A.: I agree.
 MARCHAND J.A.: I agree.
 STROMBERG-STEIN J.A.: The appeal is dismissed.
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