The King v. McLeod, [1941] SCR 228

Supreme Court of Canada

The King v. McLeod, [1941] S.C.R. 228

Date: 1941-02-21

His Majesty The King Appellant;

v.

J. W. R. McLeod Respondent.

1941: February 5; 1941: February 21.

Present: Duff C.J. and Rinfret, Crocket, Davis and Hudson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR BRITISH COLUMBIA

Criminal law—Companies—False statement by director—False by implication—Liability of director—Balance sheet of company—Loan to company treated as cash asset—Particulars—Criminal Code, sections 413 and 414.

APPEAL by the Attorney-General for British Columbia from the judgment of the Court of Appeal for British Columbia[1] which (Macdonald C.J.B.C. and O'Halloran J.A. dissenting) allowed the respondent's appeal and quashed the conviction of the accused respondent.

The respondent, who was president and managing director of the Freehold Oil Corporation Limited, obtained the sum of $40,336.46 on the 31st of March, 1937, from an associate named Miller through his secretary (Miller being away at the time) and deposited it to the credit of the Freehold Company. In repayment thereof he handed the said secretary six post-dated cheques of the Freehold Company aggregating the above sum and dated respectively the 8th, 9th, 10th, 12th, 13th and 14th of April, 1937. Three days later the Freehold Company's balance sheet was made up by the company's chartered accountants, showing current assets as of March 31st, 1937, to include " cash in bank $48,789.76." This amount included the sum of $40,336.46 obtained by the respondent as aforesaid. Four days later at a meeting of the directors the balance sheet was approved. The annual meeting of the company was called for April 14th and a copy of the balance sheet was directed to be forwarded to the shareholders with the notice calling the meeting. No disclosure was made to the shareholders of the six post-dated cheques. Particulars delivered pursuant to order stated that the false statement consisted in entries in the books of the company showing a sale of shares of another company for $40,336.46 and a re-purchase of the same number of shares from a third company for the same amount, and an audited balance sheet showing as an asset "Cash in bank" $48,789.76,

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which did not reflect the true financial position of the respondent's company. The respondent was convicted under section 414 of the Criminal Code, for that he, being a director of a public company, did, with intent to deceive its shareholders, concur in making a statement of its financial position which he knew to be false in a material particular, viz., that the assets of the company consisted of $48,789.76 in cash. The trial judge, Lennox Co.J., found that although on the material date the company had cash in the bank in said amount, yet the statement was false in that it did not show that of that amount $46,336.46 represented money borrowed by the company which was still owing to the lender. The Court of Appeal reversed that judgment, quashed the conviction and held (Macdonald C.J.B.C. and O'Halloran J.A. dissenting) that while the respondent might have been charged with falsifying the balance sheet at large in not showing the true state of the company's affairs or that it was false in particular in not disclosing the liability for the loan, nevertheless the respondent ought not to have been convicted of making a false balance sheet as alleged in the terms of the conviction, because in truth the company had in the bank to its credit the sum of $48,789.76 and that sum was an asset of the company no matter what liabilities there were against it: the Crown elected to complain of only one item and that item by itself was unquestionably a true and not a false " material particular."

E. Pepler for the appellant.

H. Aldous Aylen K.C. for the respondent.

On appeal to the Supreme Court of Canada, after hearing the arguments of counsel for the appellant and for the respondent, the Court reserved judgment, and on a subsequent day delivered judgment allowing the appeal.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—We have come to the conclusion that this appeal must be allowed. We agree with the reasons of the learned Chief Justice of British Columbia and think it unnecessary to add to them.

Appeal allowed.

Solicitor for the appellant: Eric Pepler.

Solicitor for the respondent: Elmore Meredith.