Deceit, Falsehood, or Other Fraudulent Means

From Criminal Law Notebook

General Principles

The Crown has the burden to prove beyond a reasonable doubt that deprivation was caused by "deceit, falsehood, or other fraudulent means".[1]

The offence of tax evasion is a form of fraud and so the elements of tax evasion can amount to a form of criminal fraud.[2]

"Defraud" has been defined as meaning "dishonest deprivation".[3]

  1. ↑ R v Zlatic, 1993 CanLII 35, (1993), 79 CCC (3d) 466 (SCC), per McLachlin J (3:2) at para 13
  2. ↑ Germany (Federal Republic) v Schreiber, 184 CCC (3d) 367 (ONSC) upheld at 206 CCC (3d) 339 (ONCA), 2006 CanLII 6189 (ON CA), per Sharpe JA (3:0)
  3. ↑ R v Olan, 1978 CanLII 9 (SCC), [1978] 2 SCR 1175, 5 C.R. (3d) 1, 41 CCC (2d) 145, per Dickson J

Actus Reus

Fraud is not defined in the Criminal Code. At common law it requires the basic elements of "dishonesty" and "deprivation".[1]

To "defraud" means to "dishonest deprivation".[2] To that end, the Crown must prove that the dishonest means "did in fact defraud".[3] Deprivation is usually estlablished on "proof of a detriment, prejudice or risk of prejudice to the economic interests of the victim".[4]

The actus reus for the offence is made out where there is:[5]

  1. a prohibited act of deceit, a falsehood or some other fraudulent means; and[6]
  2. a deprivation caused by the prohibited act. Either an actual loss or a pecuniary interest at risk.

Actus reus is determined "entirely on the objective facts".[7]

Where deceit or falsehood is made out, no further conduct is required to be proven.[8]

Subsequent honouring of an intention after a fraudulent act does not negate its criminal effect.[9]

  1. ↑ R v Olan, 1978 CanLII 9 (SCC), [1978] 2 SCR 1175, 5 C.R. (3d) 1, 41 CCC (2d) 145, per Dickson J at 150 ("Courts, for good reason, have been loath to attempt anything in the nature of an exhaustive definition of 'defraud' but one may safely say, upon the authorities, that two elements are essential, 'dishonesty' and 'deprivation.' To succeed, the Crown must establish dishonest deprivation.")
  2. ↑ Olan, ibid.
  3. ↑ R v Briltz, 1983 CanLII 2577 (SK QB), per Maurice J, at para 7
    R v Winning (1973), 12 CCC (2d) 449, 1973 CanLII 1408 (ON CA), per Gale CJ
  4. ↑ Briltz, supra, at para 8
  5. ↑ R v Zlatic, 1993 CanLII 35, (1993), 79 CCC (3d) 466 (SCC), per McLachlin J (3:2)
    R v Théroux, [1993] 2 SCR 5, 1993 CanLII 134 (SCC), per McLachlin J
  6. ↑ e.g. for act of deprivation see R v Kwaidah, 2010 NLCA 43 (CanLII), [2010] N.J. No. 222 (C.A.), per Wells JA (3:0), at para 26 and R v Lauer, 2011 PECA 5 (CanLII), [2011] P.E.I.J. No. 9 (C.A.), per Murphy JA (3:0), at para 79
  7. ↑ R v Wolsey, 2008 BCCA 159 (CanLII), per Huddart JA (2:1), at para 22
  8. ↑ Vladic, supra ("Most frauds continue to involve either deceit or falsehood. As is pointed out in Théroux, proof of deceit or falsehood is sufficient to establish the actus reus of fraud; no further proof of dishonest action is needed.")
  9. ↑ R v Pchajek (S.A.), 2009 MBQB 265 (CanLII), per Beard J at para 34 citing Nightingale, "The Law of Fraud and Related Offences"

Mens Rea

The mens rea is the subjective awareness of undertaking the prohibited act and awareness of the risk of depriving another of property.[1] The personal feelings of the “morality or honesty” of the act is not relevant.[2]

It is sufficient for the Crown to prove that the accused conduct was "deliberate or a product of an operating mind with the relevant facts, the circumstances in which they were undertaken, and the consequences that might result".[3]

Recklessness and Wilful Blindless
The accused may be found guilty on the basis of recklessness or willful blindness.[4] This standard applies both to the conduct and the consequence of the offence.[5]

The awareness of the risk of deprivation include recklessness.[6]

Making use of funds which the accused was wilfully blind as to its source is considered dishonest.[7]

Inferences

Evidence of legitimate transactions with an absence of any "badges of fraud" can support an inference of "non-criminal" intent.[8]

Where there is a rational basis to infer that the accused was simply duped into their role with a fraudulent conspiracy, there may be no criminal responsibility attached.[9]

Mistaken Belief / Self-Help
A mistaken belief that the victim owes the accused money cannot justify collecting debt by deceit.[10]

An accused's mistaken belief as to their legal right to take another person's property does not negate the mens rea for fraud.[11]

That the accused simply "hoped the deprivation would not take place" is not a defence where the accused knew that he was undertaking a prohibited act that could cause deprivation.[12]

The mens rea of fraud is most frequently proven by way of inference from circumstantial evidence.[13]

Wilful blindness appears in two situations in a fraud case:[14]

  1. An accused is wilfully blind with respect to the conduct element of the actus reus of fraud when he or she is aware that certain facts exist which would make such conduct a deceit, falsehood, or other fraudulent means, but deliberately refrains from making inquiries so as to remain ignorant;
  2. An accused is wilfully blind with respect to the consequence of the actus reus of fraud when he or she is aware that certain facts exist giving rise to a belief that the prohibited consequences will flow from such conduct, but deliberately refrains from making inquiries so as to remain ignorant.

In social assistance or welfare fraud, the accused does not need to know that the regulations prohibited false applications. [15]


  1. ↑ R v Théroux, 1993 CanLII 134 (SCC), [1993] 2 SCR 5, per McLachlin J, at paras 24, 27, 28 and 39
  2. ↑ Theroux, ibid., eg. (“the question is whether the accused subjectively appreciated that certain consequences would follow from his or her acts, not whether the accused believed the acts or their consequences to be moral.”)
  3. ↑ R v Cameron, 2017 ABQB 217 (CanLII), per Jeffrey J, at para 35
    R v Long (1990), 1990 CanLII 5405 (BC CA), per Taggart JA (2:1)
  4. ↑ R v Ellis, 2007 ABQB 722 (CanLII), per Verville J, at para 171
  5. ↑ Ellis, ibid., at para 175
  6. ↑ R v Zlatic, 1993 CanLII 35, (1993), 79 CCC (3d) 466 (SCC), per McLachlin J (3:2)

    R v Wolsey, 2008 BCCA 159 (CanLII), per Huddart JA (2:1) at paras 28 to 31
  7. ↑ Zlatic, supra at 478
  8. ↑ R v Milec, 1996 CanLII 315 (ON CA), [1996] OJ No 3437 (C.A.), per Carthy JA
    R v Duffy, 2016 ONCJ 220 (CanLII), per Vaillancourt J
  9. ↑ e.g. R v Bisram, 2011 ONSC 3913 (CanLII), per Hill J
  10. ↑ R v Must, 2011 ONCA 390 (CanLII), per curiam
  11. ↑ R v Kingsbury, 2012 BCCA 462 (CanLII), per Harris JA (3:0), at para 40 ("I do not agree that an honest mistake about whether in law an accused is entitled to take property or put another’s economic interests at risk is relevant to the mens rea of fraud, any more than an honest belief that the prohibited conduct is not dishonest or is not wrong is relevant to mens rea. In my opinion, it is sufficient that an accused intend or foresee the facts or circumstances that constitute deprivation.")
    R v Suzi, 2018 ABPC 130 (CanLII), per Shaigec J, at paras 27 to 31
    Must, supra
  12. ↑ R v Emms, 2010 ONCA 817 (CanLII), per Rosenberg JA, at para 32
  13. ↑ Ellis, supra, at para 174
  14. ↑ R v Bailey, 2014 ABPC 103 (CanLII), per Fradsham J, at para 420 - citing Nightingale, Law of Fraud and Related Offences
  15. ↑ R v Bavarsad, 2007 BCCA 527 (CanLII), per Tysoe JA (3:0)

Deceit or Falsehood

"Deceit" is "an untrue statement made by a person who knows that it is untrue, or has reason to believe that it is untrue, but makes it despite that risk, to induce another person to act on it, as if it were true, to that other person’s detriment."[1] This requires a subjective awareness of the dishonesty.[2]

"Falsehood" is a "deliberate lie".[3]

"Dishonesty" is determined on an objective standard determined by what a reasonable person would consider dishonest. [4] Dishonesty can also include non-disclosure where a reasonable person would consider it dishonest.[5]

A dishonest act can include the use of funds for a purpose other than the purpose for which they were received.[6]

  1. ↑ R v Stephenson, 2006 BCCA 25 (CanLII), per Rowles JA (3:0), at para 102 - deceit is established when accused induces a person to believe something the deceiver knows is false
  2. ↑ R v Sebe, 1987 CanLII 980 (SK CA), per Bayda CJ (3:0) ("Whatever may be their meanings in the civil law, the notions of deceit, falsehood and fraud, when used in a criminal law context, connote an element of subjective or deliberate dishonesty. Thus, in the case of deceit and falsehood, the perpetrator who uses these means must know the falsity of his statement or be reckless as to its truth for there to be deceit or falsehood within the meaning of the section. Similarly, in the case of an act, the actor must know that the act is dishonest.")
  3. ↑ Stephenson, supra at para 102
  4. ↑ R v Mercer, 1998 CanLII 18029 (NL CA), per Green JA at 13
    Théroux, supra, at para 39
  5. ↑ R v Zlatic, 1993 CanLII 35, (1993), 79 CCC (3d) 466 (SCC), per McLachlin J (3:2)
  6. ↑ R v Horsman, 2002 SKCA 2 (CanLII), [2002] S.J. No. 9, per Sherstobitoff JA (3:0)

Examples

A dealership was found guilty of fraud for misrepresenting their vehicles for sale as new when they were used demo models.[1]

A victim's failure to detect or avoid the deception does not remove any degree of culpability.[2]

  1. ↑ R v Ontario Chrysler (1977) Ltd., 1994 CanLII 8758 (ON CA), (1994), 2 M.V.R. (3d) 239, 69 O.A.C. 185 (C.A.), per Doherty JA
  2. ↑ R v Pchajek, 2009 MBQB 265 (CanLII), per Beard J, at para 34

Other Fraudulent Means

"Other fraudulent means" is a "term that covers more ground than either deceit or falsehood. It includes any other means, which are not deceit or falsehood, properly regarded as dishonest according to the standards of reasonable people" but include all other means that are "stigmatized as dishonest".[1] The question of whether conduct fits into "other fraudulent means" is a question of fact.[2]

The actus reus consist of "dishonest" conduct that causes deprivation.[3]

  1. ↑ R v Mercer, 1998 CanLII 18029 (NL CA), (1998), 160 Nfld. & P.E.I.R. 174 (N.L.C.A.), per Green JA at 13
    R v Olan et al., 1978 CanLII 9, [1978] 2 SCR 1175, per Dickson J (9:0) at p. 1180
    R v Emond, 1997 CanLII 10605 (QC CA), per Beadouin JA
    R v Feddema, 2005 ABCA 236 (CanLII), per curiam (3:0) at para 53 (“all means other than deceit or falsehood that may be properly stigmatized or dishonest.”)
  2. ↑ Nightingale, The Law of Fraud and Related Offences at 3.1(a)(i)
  3. ↑ R v Long, 1990 CanLII 5405 (BC CA), per Taggart JA

Dishonesty

Dishonesty can be an act or an omission whereby silence about and essential aspect.[1]

The issue of actus reus is determined objectively as to whether a reasonable person would consider the conduct to be "dishonest".[2] The standard is not based on the trier-of-facts' own personal views of honesty but rather what the "community" would consider to be honest and dishonest.[3] It includes "conduct which ordinary decent people would feel was discreditable as being clearly at variance with straightforward or honourable dealings, is dishonest conduct".[4]

Dishonesty "may include, but is not limited to, deceit or falsehood".[5]

Dishonesty is distinguished from "carelessness", "improvidence", and "sharp practices".[6]

Merely falling "below the highest standard of straightforward or honourable dealings ... alone" will not be sufficient to make out fraud.[7]

  1. ↑ Emond ("Le mensonge peut consister en un acte positif, mais aussi parfois en une simple réticence, c'est-à-dire en une situation où, par son silence, un individu cache à l'autre un élément capital et essentiel.")
  2. ↑ Nightingale, at 3.1(a)(i)
  3. ↑ R v Gatley, 1992 CanLII 1088 (BC CA), per curiam (3:0) ("In this connection it would be important to instruct the jury that they should determine honesty or dishonesty not necessarily in accordance with their own personal views, but rather in the way they believe the community would consider that difficult question.)
  4. ↑ Long, supra, at para 23
    R v Lajoie, 1999 CanLII 13597 (QC CA), per curiam
  5. ↑ Long, supra, at para 119
  6. ↑ R v Theroux, [1993] 2 SCR 5, 1993 CanLII 134 (SCC), per McLachlin J at p. 26
  7. ↑ R v Doren, 1982 CanLII 2197 (ON CA), per Dubin JA ("I agree with counsel for the appellant that it cannot be said that in every case where the trier of fact determines that conduct falls below the highest standard of straightforward or honourable dealings that that finding alone would be sufficient to make out a case of fraud or conspiracy to defraud. I think that imposes too high a standard against which to measure criminality")

Examples of Fraudulent Means

Types of conduct include:[1]

  1. misuse of corporate assets, including for personal use[2]
  2. breach of trusts / exploiting weakness of another;
  3. non-disclosure of material facts[3]
  4. unauthorized diversion of funds or property[4]
  5. breach of contractual obligations

These classes of "other fraudulent means" can encompass many scenarios.

Misuse of Assets

Fraud includes the use of company assets for personal purposes.[5]

Directors who use assets for purposes which are not bona fides in the best interests of the company and not for a legitimate purpose then the directors may be liable for fraud.[6]

A president and sole shareholder of a real estate company who redirected money from clients to him personally instead of the company was found guilty of fraud and theft.[7]

See also: R v Black (1983) 5 CCC (3d) 313 (ONCA), 1983 CanLII 3493 (ON CA), per Grange JA

Material Non-Disclosure
Where an accused who omitted to tell his investors, who are purchasing a building, that he bought it personally and was re-selling for a profit.[8]

Where the Crown is relying on material non-disclosure, there must be a duty to disclose, typically arising from the relationship between the parties.[9]

  1. ↑ Nightingale, at 3.1(b)
    some listed in R v Theroux at p. 204
    see also R v Zlatic, 1993 CanLII 35, (1993), 79 CCC (3d) 466 (SCC), per McLachlin J (3:2)
    R v Lauer, 2011 PECA 5 (CanLII), per Murphy JA (3:0)
  2. ↑ Zlatic, supra, ("These situations include, to date, the use of corporate funds for personal purposes")
  3. ↑ R v Olan et al., 1978 CanLII 9 (CanLII), [1978] 2 SCR 1175, per Dickson J (9:0)
    Zlatic, supra (“other fraudulent means has been used to support a conviction in situations involving the non-disclosure of important facts”)
  4. ↑ Zlatid, supra ("These situations include, ... unauthorized diversion of funds...")
  5. ↑ Criminal Fraud by J. Douglas Ewart (Toronto: Carswell, 1986) at p. 85
  6. ↑ Cox and Olan, supra
  7. ↑ R v Verville, 1999 CanLII 13272 (QC CA), (1999), 140 (3d) 293 (Que. C.A.), per Thibault JA (3:0)
  8. ↑ R v Emond, 1997 CanLII 10605 (QC CA), (1997), 117 CCC (3d) 275 (Que. C.A.), per Beadouin JA
  9. ↑ R v Monkman (1980), 4 Man. R. (2d) 352 (Co. Ct.)(*no CanLII links)
    R v D’amour 2002 CanLII 45015 (ON CA), (2002), 166 CCC (3d) 477 (Ont. C.A.), per Doherty JA (3:0)
    R v Vanderveen, 2002 BCSC 236 (CanLII), per Joyce J
    R v Easte, 2002 BCSC 615 (CanLII), per Holmes J
    R v Feddema, 2005 ABCA 236 (CanLII), per curiam (3:0)

Deprivation or Risk of Deprivation (Prohibited Consequences)

The requirement of a deprivation "is satisfied on proof of detriment, prejudice, or risk of prejudice to economic interests of the victim. It is not essential that there be actual economic loss as the outcome of the fraud."[1]

It is further required in order to prove "dishonest deprivation" that the victim would not have otherwise allowed the deprivation to happen if they had known the true state of affairs.[2]

It is no defence for the accused to have simply "hoped" that deprivation would not have occurred or that they felt that there was "nothing wrong" with their conduct.[3]

Actual loss is not necessary, it is sufficient to show an actual risk of loss.[4] "Deprivation" includes the risk of deprivation.[5]. It may also include risk of prejudice to economic interests.[6]

The accused does not have to obtain any property to complete the offence. Thus, if the accused is deprived of property due to it going to someone else is enough.[7]

There are three ways to prove deprivation:[8]

  1. that as a consequence of the prohibited act there be a deprivation of “the economic interests of the victim”[9];
  2. that the prohibited consequence of the dishonest act is to deprive another of “what is or should be his”, which may consist of “merely placing another’s property at risk”[10]; or
  3. “[a possible] actual loss or the placing of the victim’s pecuniary interests at risk” caused by the dishonest act[11]

Where the Crown relies on actual deprivation, a reasonable doubt whether the victim was deprived will result in an acquittal.[12]

A risk of deprivation only occurs from the time that assets are transferred.[13]

Causation

The Crown must also prove that the dishonest means used did in fact result in the deprivation.[14]

  1. ↑ R v Olan et al., 1978 CanLII 9, [1978] 2 SCR 1175 41 CCC (2d) 145, per Dickson J (9:0) at 149 at 150
    R v Zlatic, 1993 CanLII 135 (SCC), [1993] 2 SCR 29, per McLachlin J (3:2)
  2. ↑ R v Knowles (1979), 51 CCC (2d) 237 (Ont. C.A.), 1979 CanLII 2919 (ON CA), per Martin JA
  3. ↑ Theroux, supra, at para 24
  4. ↑ R v Drabinsky, 2011 ONCA 582 (CanLII), [2011] OJ No 4022 (C.A.), per curiam (3:0), at para 82
    Zlatic, supra
    R v Campbell, 1986 CanLII 35 (SCC), [1986] 2 SCR 376, per Lamer J (5:0)
  5. ↑ Olan, supra ("It is not essential that there be actual economic loss as the outcome of the fraud.") at para 13
  6. ↑ Olan, supra
  7. ↑ R v Huggett (1978), 4 C.R. (3d) 208, 42 CCC (2d) 198 (Ont. C.A.), 1978 CanLII 2529 (ON CA), per Arnup JA (3:0)
  8. ↑ R v Kingsbury, 2012 BCCA 462 (CanLII), per Harris JA (3:0), at para 29 - court summarized “deprivation”
  9. ↑ Olan, supra as quoted in Théroux, supra at 15
  10. ↑ Théroux, supra at 19
  11. ↑ Théroux at 20
    see also in Zlatic, supra at 43
  12. ↑ Théroux at para 24 (“[i]f there is a reasonable doubt as to whether the victim was deprived, the accused must be acquitted.”)
  13. ↑ United States of America v Schrang, 1997 CanLII 3588 (BC CA), per Finch JA (3:0) at para 42
  14. ↑ See R v Winning (1973), 12 CCC (2d) 449, 1973 CanLII 1408 (ON CA)
    Kingsbury, supra, at para 29
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