Respondents, who owned and operated Casecam Manufacturing, hired a firm of chartered accountants to arrange additional financing for their company. An accountant organized a factoring scheme by which respondents would sell their company's accounts receivable for cash and the buyer of the accounts would collect the sum due from the manufacturing company's clients. A sole proprietorship called Casecam Financial Services was established and registered in the name of the accountant's secretary to serve as a conduit between the respondents and the individual investor interested in buying the accounts receivable. When Casecam Manufacturing required funds, Casecam Financial Services prepared a contract of assignment and the funds, which were provided to it by an investor, were advanced to the respondents in return for the company's accounts receivable. The respondents then issued a cheque to Casecam Financial Services for the first month's interest, which was divided between Casecam Financial Services, for its administrative services, and the investor. The respondents acquired an interest in another company, Gorlee Greenhouses, and a similar factoring scheme was arranged with a sole proprietorship called Gorlee Financial Services. Later, it was discovered that the respondents had submitted false invoices. The respondents were acquitted, on a directed verdict, of charges of defrauding Casecam Financial Services and Gorlee Financial Services. The trial judge found that sole proprietorships were not "persons", within the meaning of the Criminal Code , capable of being defrauded. The trial judge also denied the Crown's motion to amend the indictment by substituting the names of new victims because it would be prejudicial to the respondents' defence. The Court of Appeal upheld the judgment. This appeal is to determine whether the Court of Appeal erred in affirming the trial judge's decision to refuse the amendment sought by the Crown and, if not, whether the trial judge correctly directed the verdict.
Held: The appeal should be dismissed.
While the decision to refuse an amendment is, under s. 529(6) of the Criminal Code , a question of law and reviewable by the Court of Appeal on a Crown appeal, the decision of the trial judge, when based upon a finding of irreparable prejudice, should not be interfered with lightly and should be made keeping in mind the trial judge's privileged position as regards the effect on the fairness of a trial of events taking place in the courtroom. In the case at bar, there was no good reason for this Court to interfere with the Court of Appeal's exercise of restraint.
Proprietorships are not in and of themselves "persons" capable of being defrauded. They are the registered names under which persons, capable of being defrauded, do business. The Crown, in making reference to the proprietorships, indicated that the victim it was particularizing was the accountant's secretary‑‑the sole person registered under the proprietorships‑‑and that it was in the operation of those two proprietorships that she was defrauded, and it undertook to make its case within these narrow confines. While it is not essential for a victim to be defrauded of any property, money or valuable security or that there be actual economic loss as to the outcome of the fraud, there must nevertheless be an actual risk of prejudice to the economic interests of the alleged victim. Under the factoring scheme, however, there was no such risk because she was only a "conduit" in the transactions, being instrumental to the flow of money between the respondents and the buyers of the accounts receivable.
Cases Cited
Followed: Vézina and Côté v. The Queen, [1986] 1 S.C.R. 2; referred to: R. v. Olan, [1978] 2 S.C.R. 1175.
Statutes and Regulations Cited
Criminal Code, R.S.C. 1970, c. C‑34, ss. 2 "person", 338(1)(a) [1974‑75‑76, c. 93, s. 32], 510(3), 512, 529(4), (6).
APPEAL from a judgment of the Ontario Court of Appeal, upholding a judgment of Hoilett Co. Ct. J. directing a verdict of acquittal on a charge of fraud. Appeal dismissed.
Jeff Casey, for the appellant.
Clay M. Powell, Q.C., and Barbara Bogoch, for the respondents.
The judgment of the Court was delivered by
1. Lamer J.‑‑
Introduction
2. The respondents were acquitted of fraud on a verdict directed by Judge Hoilett, a County Court Judge of Ontario. That decision was upheld by the Court of Appeal for Ontario. The Crown now comes to this Court by leave. All of the proceedings below and the granting of leave to appeal to this Court took place prior to this Court's decision in Vézina and Côté v. The Queen, [1986] 1 S.C.R. 2, wherein most of the issues arising out of this appeal were addressed extensively.
Facts
3. The respondents owned and operated a manufacturing company, Casecam Manufacturing Co. Ltd. Casecam Manufacturing used the services of Yale & Partners, a firm of chartered accountants. In August of 1977 the respondents approached one Brian Rosenthal, a partner with Yale, seeking additional financing for Casecam Manufacturing. Mr. Rosenthal arranged for a group of investors to provide funds for a factoring scheme by which the respondents would sell Casecam Manufacturing's accounts receivable for cash and the buyer of the accounts receivable would collect the sum due from Casecam Manufacturing's clients.
4. Mr. Rosenthal arranged for a "conduit", in the form of a sole proprietorship called Casecam Financial Services, to channel funds from individual investors to Casecam Manufacturing. Casecam Financial Services was established in the name of Anna Teremy, Rosenthal's secretary and common‑law wife. The routine established was that when Casecam Manufacturing required funds, the respondent Kotler would notify Mr. Rosenthal or Ms. Teremy of the name and the amount of the receivables to be assigned. Mr. Rosenthal would then arrange for an individual investor to provide funds to Casecam Financial Services. A contract of assignment would be prepared, and the assignment would be registered. The respondents provided copies of the invoices for completed sales, and a cheque would be issued to the respondents in the name of Casecam Financial Services. The respondents in turn would issue a cheque to Casecam Financial Services for the first month's interest (2½ per cent per month), which was divided between Casecam Financial Services (½ per cent) and the individual investor (2 per cent).
5. In November 1977, the respondents acquired an interest in Gorlee Greenhouses, a division of Casecam Manufacturing. A similar factoring scheme was operated in relation to Gorlee Greenhouses, with a sole proprietorship called Gorlee Financial Services registered in Ms. Teremy's name and purchasing its accounts receivable.
6. These schemes operated until April or May of 1978, when it was discovered that the respondents had been submitting false invoices to Casecam Financial Services and Gorlee Financial Services. These invoices totalled about $524,765. When confronted with this, the respondents made partial restitution ($80,000), but filed a corporate assignment in bankruptcy on May 29, 1978. The various individuals and companies who had invested in the factoring scheme suffered losses ranging from about $10,000 to $466,660. Ms. Teremy made a profit by reason of the fees received for her administrative services in relation to Casecam Financial Services and Gorlee Financial Services.
7. The respondents were charged that they "by deceit, falsehood or other fraudulent means, defrauded Casecam Financial Services and Gorlee Financial Services of monies exceeding $200.00".
Legislation
8. The sections of the Criminal Code, R.S.C. 1970, c. C‑34, as amended, that are relevant to the disposition of this appeal are the following:
2. In this Act
...
"every one", "person", "owner", and similar expressions include Her Majesty and public bodies, bodies corporate, societies, companies and inhabitants of counties, parishes, municipalities or other districts in relation to the acts and things that they are capable of doing and owning respectively;
338. (1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security,
(a) is guilty of an indictable offence and is liable to imprisonment for ten years, where the subject‑matter of the fraud is a testamentary instrument or where the value thereof exceeds two hundred dollars;
510....
(3) A count shall contain sufficient detail of the circumstances of the alleged offence to give to the accused reasonable information with respect to the act or omission to be proved against him and to identify the transaction referred to, but otherwise the absence or insufficiency of details does not vitiate the count.
512. No count in an indictment is insufficient by reason of the absence of details where, in the opinion of the court, the count otherwise fulfils the requirements of section 510 and, without restricting the generality of the foregoing, no count in an indictment is insufficient by reason only that
...
(b) it does not name the person who owns or has a special property or interest in property mentioned in the count,
(c) it charges an intent to defraud without naming or describing the person whom it was intended to defraud,
...
(g) it does not name or describe with precision any person, place or thing...
529. ...
(4) The court shall, in considering whether or not an amendment should be made, consider
(a) the matters disclosed by the evidence taken on the preliminary inquiry,
(b) the evidence taken on the trial, if any,
(c) the circumstances of the case,
(d) whether the accused has been misled or prejudiced in his defence by a variance, error or omission mentioned in subsection (2) or (3), and
(e) whether, having regard to the merits of the case, the proposed amendment can be made without injustice being done.
(Emphasis added.)
The Judgments
County Court
9. After the Crown closed its case, the accused chose to adduce no evidence. Defence counsel did not, either before or after announcing that no evidence would be adduced in defence, move for a directed verdict. Rather, in the course of his address to the jury he expressed the view that the trial judge would direct a verdict of acquittal on the basis that the victims alleged in the indictment, Casecam Financial Services and Gorlee Financial Services, were not persons, in law, capable of being defrauded within the meaning of s. 338(1) of the Criminal Code of Canada .
10. Following defence counsel's address to the jury, the trial judge excluded the jury and dealt with the situation as if Mr. Powell, counsel for the defence, had made a motion for a directed verdict. Having found that Casecam and Gorlee Financial Services were sole proprietorships he agreed with Mr. Powell that, not being persons under s. 2 of the Code, they were not capable of being defrauded.
11. The Crown, who disagreed with this reading of s. 2, sought, as a fallback position, an amendment which, as described by the judge, was in substance seeking "that Mr. Friedlander, Mr. Rosenthal and Mr. Nelson Goldsmith, who were the principal financial losers in the relationship between the accused and the two entities described as conduits, that those persons should be added or substituted as being the persons defrauded in the indictment". The trial judge dismissed the motion to amend, giving the following reasons:
In my view, based on the evidence, if I were to accede to that request for an amendment and either add or substitute Messrs. Friedlander, Rosenthal and Goldsmith as the persons defrauded in effect I would be naming a new victim. In my view, that cannot be considered anything other than a substantial change and variation. That, in itself, might be grounds enough to deny the application for an amendment.
Equally important, in my view, is also the stage at which we have reached in the trial. Counsel have already made their submissions to the jury. Mr. Powell, for whatever reasons, has chosen or elected not to adduce any evidence. Given all those circumstances, in my view, it is impossible to conclude that had an amendment been sought and granted at some more opportune time that the defence may not have adopted a different approach in this trial. In fact, Mr. Powell indicated he very well might have. Given all those circumstances, in my view, as I have said, it is not an appropriate case for granting an amendment, notwithstanding the fact that I am of the view that I have the jurisdiction to do so, notwithstanding the advanced stage of the trial. Accordingly, that motion is denied.
He then concluded his reasons as follows:
That is probably sufficient to dispose of my decision but contrary to wisdom I will gratuitously say that on the evidence, if I were disposed to grant an amendment, I would think that the more appropriate amendment would be to amend the indictment to name the person being defrauded as Anna Teremy, carrying on business under the name of whatever the two entities are. My reason for so concluding is that although ironically Miss Teremy did not appear to suffer any financial loss in the sense that the others had, it may validly be argued, in my view, that in law she was the person who was vested with control of a substantial amount of money operated through Casecam Financial Services and Gorlee Financial Services, the sole proprietorships she operated, and as such was a person capable of being defrauded if properly so named.
In any event, as I have said, particularly having regard to the stage of the trial to which we have reached, I am not prepared to conclude that I could grant such an amendment without prejudice to the defence.
The trial judge then instructed the jury to return a verdict of not guilty.
Ontario Court of Appeal (Howland C.J.O.)
12. The judgment of the Court is succinct and can conveniently be reproduced here in toto.
In the particular circumstances we are not persuaded that the trial judge was wrong in refusing to amend the indictment and in directing a verdict of acquittal.
Nor has counsel for the Crown persuaded us that a different verdict would necessarily have been reached if the amendment had been made, because in our opinion there was no evidence that Anna Teremy had been defrauded.
We are not to be understood as having determined that an amendment was necessary in order to state that Anna Teremy was carrying on business under the names of Casecam Financial Services and Gorlee Financial Services.
(Emphasis added.)
Issues
13. There are many ways to frame the issues in this case. I find it convenient to frame them as follows and in the following order:
1. Did the Court of Appeal err in not reversing the trial judge's decision to refuse the amendment sought by the Crown?
2. If not, was the trial judge right in directing the verdict? This latter issue requires that we address the following questions:
(a) are sole proprietorships persons capable of being defrauded?
(b) if not, was the naming of the sole proprietorships as the victims a sufficient indication that the Crown was undertaking to prove that the sole registered owner, Anna Teremy, was the person defrauded?
(c) if so, was the Court of Appeal correct in its determination that there was no evidence that Anna Teremy had been defrauded?
14. Most of these issues were recently addressed by this Court in Vézina and Côté v. The Queen, supra, and I do not intend to reiterate at any length what was said in that judgment.
First Issue: The Amendment
15. The issue is obviously not whether there was evidence to support the amendment sought. Indeed there was ample evidence and one wonders why the Crown, having chosen to name victims, chose not to name Friedlander, Rosenthal and Goldsmith or the other investors as the victims. The trial judge found that an amendment would have caused irreparable prejudice to the accused's conduct of the case. The Court of Appeal chose not to interfere with that finding though it could have on a Crown appeal since under s. 529(6) of the Criminal Code the decision to refuse an amendment is a question of law. I find no good reason to interfere with the Court of Appeal's exercise of restraint when considering such a finding by a trial court. As was said by this Court in Vézina and Côté v. The Queen, supra, at p. 29: "the decision of the trial judge, when based upon a finding of irreparable prejudice should not be interfered with lightly and should be made keeping in mind the trial judge's privileged position as regards the effect on the fairness of a trial of events taking place in the courtroom".
Second Issue: The Directed Verdict
16. Anna Teremy was the sole person registered under the proprietorships. Proprietorships are not in and of themselves persons capable of being defrauded. Proprietorships are the registered names under which persons, capable of being defrauded, do business. The Crown, in its written argument before this Court, recognized that the specification of Casecam Financial Services and Gorlee Financial Services as victims were really indications that Anna Teremy was the victim. The sole proprietorships were "simply business aliases for Anna Teremy" and she was "synonymous with the proprietorships".
17. My view of the matter is as follows: The effect of the Crown's reference to these proprietorships was threefold: first, the Crown was indicating that the victim it was particularizing was Anna Teremy; second, that it was in the operation of those two proprietorships that she was defrauded and not otherwise as, let us say, an investor like Rosenthal; and thirdly, that the Crown was undertaking to make its case (subject to and until an amendment was sought and granted) within these narrow confines, and the defence was entitled to so assume and conduct its case accordingly.
18. The Crown having been unsuccessful with its attempt to amend, and leaving the trial judge's decision undisturbed, the sole remaining question is whether the Court of Appeal erred in finding no evidence that Anna Teremy was defrauded. While it is not essential for a victim to be defrauded "of any property, money or valuable security", "that there be actual economic loss as to the outcome of the fraud" (see R. v. Olan, [1978] 2 S.C.R. 1175, at p. 1182, per Dickson J. (as he then was)), there must nevertheless be an actual "risk of prejudice to the economic interests" of the alleged victim, in this case Anna Teremy.
19. Under the scheme there was no such actual risk of prejudice to the economic interests of Ms. Teremy. She was, as the trial judge found, but a "conduit" in the transactions, being instrumental to the flow of money between the respondents and the buyers of the receivables. Even if she had been made an innocent instrument in a scheme she would not have wanted to be part of had she not been deceived by the accused as regards the authenticity of certain receivables, that still would not have been sufficient to meet the test of "risk of prejudice" to her economic interests. This Court has addressed that issue in Vézina and Côté, supra, and made particular reference to the danger of looking for guidance as regards the notion of fraud in s. 338 of the Code, to other jurisdictions, where it was stated, at pp. 22‑23:
Reference to decisions in other jurisdictions under the common law of fraud or to English cases under their Larceny Act, 1861, and 1916, or their Theft Act, 1968, and 1978, must be read keeping in mind the fact that s. 338 of our Code is different. While I agree with the oft quoted statement in R. v. Wines (1953), 37 Cr. App. Rep. 197 at p. 199 that "decei(t) is, by falsehood, to induce a state of mind" and that "to defraud is, by deceit, to induce a course of action", we must keep in mind that in Canada s. 338 of the Criminal Code reads on to say that that course of action must be in the nature of depriving someone of "property, money or valuable security".
In Scotland it has been found, in Adcock v. Archibald, [1925] J.C. 58, that under the common law, "any definite, practical result achieved by the fraud is enough" (per Lord Justice‑General Clyde, at p. 61), and that "The essence of the offence consists in inducing the person who is defrauded either to take some article he would not otherwise have taken, or to do some act he would not otherwise have done, or to become the medium of some unlawful act" (per Lord Hunter, at p. 61). That wide notion of fraud has met with resistance in that jurisdiction (see Gordon, G. H., The Criminal Law of Scotland (2nd ed. 1978), at p. 603). Clearly that cannot be the law in Canada under our s. 338.
20. I therefore agree with the Court of Appeal that there was no evidence that Anna Teremy, the only victim upon which the Crown's case could rest, had been defrauded of property, money or valuable security.
21. I would accordingly dismiss this appeal.
Appeal dismissed.
Solicitor for the appellant: The Ministry of the Attorney General, Toronto.
Solicitor for the respondents: Clay M. Powell, Toronto.
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