2012 QCCQ 15301, 2012 QCCQ 15301

R. c. Paquette 2012 QCCQ 15301 JF 0929 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF LOCALITY OF SAINT-FRANÇOIS SHERBROOKE "Criminal and Penal Division" No.: 450-73-000710-099 DATE: December 3, 2012 ______________________________________________________________________ THE HONOURABLE HÉLÈNE FABI, J.C.Q., PRESIDING ______________________________________________________________________ THE QUEEN Prosecutrix v.

PIERRE PAQUETTE Accused ______________________________________________________________________ J U D G M E N T ______________________________________________________________________ [ 1 ] The accused stands trial on the following three charges: [ translation ] 1.

Between March 10, 2005, and August 24, 2006, did make a fraudulent disposition of his property before or after the date of the initial bankruptcy event of the company "Les Développements Le Monarque Inc.", having done business under the company corporate name, "Les Développements Le Monarque Inc.", of which he was one of the directors, administrators or mandataries, to wit: by transferring amounts of money totalling approximately $250,568.48 to persons, companies or enterprises for the benefit of 9129-6988 Québec inc., thereby committing the indictable offence in paragraph 198(1) (

a) and

section 204 of the Bankruptcy and Insolvency Act , R.S.C. (1985), c. B-3, s. 1 ; 1992, c. 27, s. 2. 2. Between September 15, 2005, and August 17, 2006, did make a fraudulent disposition of his property before or after the date of the initial bankruptcy event of the company "Les Développements Le Monarque Inc.", having done business under the company corporate name, "Les Développements Le Monarque Inc.", of which he was one of the directors, administrators or mandataries, to wit: by transferring amounts of money totalling approximately $147,651.17 to persons, companies or enterprises for the benefit of 9129-6954 Québec inc., thereby committing the indictable offence in paragraph 198(1) (

a) and

section 204 of the Bankruptcy and Insolvency Ac t, R.S.C. (1985), c. B-3, s. 1 ; 1992, c. 27, s. 2. 3. Between April 16, 2004, and May 4, 2006, did make a fraudulent disposition of his property before or after the date of the initial bankruptcy event of the company "Les Développements Le Monarque Inc.", having done business under the company corporate name, "Les Développements Le Monarque Inc.", of which he was one of the directors, administrators or mandataries, to wit: by transferring amounts of money totalling approximately $108,212.87 to persons, companies or enterprises for his own benefit, thereby committing the indictable offence in paragraph 198(1) (

a) and

section 204 of the B ankruptcy and Insolvency Act, R.S.C. (1985), c.

B-3, s. 1 ; 1992, c. 27, s. 2. [ 2 ] In its submissions, the prosecution conceded at the outset that the accused, after having testified and given his version of events, had managed to raise a reasonable doubt as to the approximate amounts indicated in each of the three charges. [ 3 ] That being the case, the prosecution submits that the accused should be convicted on each of the charges, the wording of which should be modified to delete the words [ translation ] "totalling approximately $250,568.48", "totalling approximately $147,651.17", and "totalling approximately $108,212.87" in counts 1, 2 and 3 of the indictment respectively, pursuant to

section 662 of the Criminal Code (see Arguments of the Prosecution at trial, paragraphs 96, 97 and 98). ADMISSIONS [ 4 ] At the outset of the trial, the parties made certain admissions, which are listed in exhibit P-3. [ 5 ] An organizational chart outlining the individuals and companies related to the company "Les Développements Le Monarque

Inc." is filed as exhibit P-8, for a better understanding of the case. EXHIBITS FILED BY THE PROSECUTION [ 6 ] The prosecution has filed in evidence six books of documents which include a

summary, several banking documents, and numerous exhibits seized by the Royal Canadian Mounted Police, who carried out the investigation in the accused's case. [ 7 ] Exhibit P-2 is divided into three sections: - the first concerns count 1 - the second concerns count 2 - and the third concerns the count 3. [ 8 ] Each

section of exhibit P-2 contains a table drawn up by the RCMP in which the amounts of the allegedly fraudulent transactions are listed, along with any cheques relating to these allegedly fraudulent transactions. [ 9 ] The facts surrounding this case are relatively numerous and the Court does not intend to list them all. Rather, it will summarize what it believes are relevant. ISSUE IN DISPUTE [ 10 ] Did the described actions of the accused constitute a dishonest act tantamount to fraudulent means? THE RELEVANT FACTS [ 11 ] Let us first place the case in context.

The undisputed evidence demonstrates that 9129-6970 Quebec inc. was incorporated on May 14, 2003. The corporate name was replaced on July 2, 2003, by Les Développements Le Monarque Inc. [ 12 ] On that date, the accused and Pierre Boudreau became equal partners in the company Les Développements Le Monarque Inc. Pierre Boudreau began acting as vice-president and the accused as president in May of 2003. [ 13 ] The two shareholders had well-defined roles.

Pierre Boudreau assumed responsibility for starting construction on the project and for meeting with subcontractors, while the accused was responsible for finding investors for the project, which was estimated at several million dollars, and for selling the condominiums. [ 14 ] The project involved the construction of nineteen buildings with four condominiums each, for a total of seventy-six condominiums and common areas, including a club house, a pool, and a wine cellar.

This residential complex was located on 12th Avenue North, in Sherbrooke. [ 15 ] On May 28, 2003, a loan of $225,000 was granted to Les Développements Le Monarque Inc. by the Caisse populaire de Rock Forest to finance the lands on which the condominiums were to be built (see exhibit P-1 at 154). [ 16 ] On May 28, 2004, the same Caisse granted Les Développements Le Monarque Inc. a line of credit of $500,000 (see exhibit P-1 at 151). [ 17 ] The accused personally advanced funds to Les Développements Le Monarque Inc. to buy the land in question.

According to the cheques deposited as exhibit D-16, he advanced nearly $20,000. [ 18 ] Because they needed a great deal of financing, the accused found investors. According to him, there were a dozen. Among them were Guy Larkin, Claude Provost, Germain Béland, Claude Houle, and many others. [ 19 ] Pierre Boudreau had been the owner of Construction Pier Inc. since April 25, 2003.

This company was a licenced construction contractor. [ 20 ] He began construction on the project through the intermediary of this company, but two-thirds of the way through, Les Développements Le Monarque Inc. took over because it had obtained its construction permit, making it eligible for new home warranties. [ 21 ] From the beginning of this residential project up until 2005, the accused received no income from Les Développements Le Monarque Inc. [ 22 ] On May 20, 2003, another company, 9129-6954 Québec inc. was created.

It was administered by Pierre Boudreau as treasurer and by the accused as president. [ 23 ] On August 11, 2005, Lise Laverdière became a partner in 9129-6954 Québec Inc., doing business under the name Novomédia or Estrie Magazine. [ 24 ] Lise Laverdière held 50% of the shares of this company, while Pierre Boudreau and the accused each held 25%.

[ 25 ] On May 20, 2003, the accused created his management company, 9129-6988 Québec Inc., and on August 22, 2003, Pierre Boudreau also created a management company, 9132-8849 Québec inc. [ 26 ] On December 13, 2004, these two management companies, 9132-8849 Québec inc. and 9129-6988 Québec inc., became equal shareholders in Les Développements Le Monarque inc. [ 27 ] Since Les Développements Le Monarque inc. was experiencing serious financial problems, a petition for a receiving order was filed on June 27, 2007, following which a receiving order was made on September 10, 2007, [ 28 ] To explain the background and the facts in the accused's case, the prosecution called Denis Fortier, trustee in bankruptcy, Jean- Marc Ménard, police officer for the Royal Canadian Mounted Police (RCMP) and Pierre Boudreau, shareholder in Les Développements le Monarque Inc. [ 29 ] For his part, the accused testified and called in his defence Mtre Michel Lamoureux, notary, Pierre Chartier, chartered accountant, and Johanne Marquis, accountant for the company, all of whom had been involved in the Les Développements Le Monarque Inc. project. [ 30 ] For the purposes of this judgment and for the sake of clarity, the Court will refer to the company Les Développements Le Monarque Inc. as "Monarque", the accused's management company 9129-6988 Québec inc. as "6988", and 9129-6954 Québec inc. as "Novomédia". [ 31 ] The official receiver named Denis Fortier as trustee to the assets of Monarque. [ 32 ] Monarque's only assets consist of 13 condominiums, all built, but heavily mortgaged.

All the other condominiums (63) were sold before the bankruptcy. [ 33 ] Denis Fortier called the accused in to receive a bankruptcy balance sheet and a list of Monarque's creditors from the accused. [ 34 ] The accused gave him that information, along with three boxes of Monarque's accounting documents. [ 35 ] Subsequently, a meeting of creditors was convened on October 5, 2007. The creditors asked the trustee to file a request for investigation with the RCMP.

None of the creditors mentioned dishonesty or fraud on the part of the accused and Pierre Boudreau, however. [ 36 ] According to the documents and accounting balance sheets from 2006 (28/02/06) consulted by the trustee, several sums of money were transferred to persons related to Monarque. [ 37 ] According to Denis Fortier, at first glance, several transactions are reviewable, subject to question, and might have been carried out before the bankruptcy in favour of related persons within the meaning of the Bankruptcy Act , to the detriment of the creditors, when Monarque was insolvent. [ 38 ] According to the documents consulted, significant sums of money were transferred to, inter alia , the accused's company 6988, Novomédia, and the accused personally. [ 39 ] According to the balance sheet dated February 28, 2006, advances in the amount of $743,164 were paid to related companies or persons (including Pierre Boudreau personally, as well as his two companies 9132-8849 Québec Inc. and Construction Pier Inc.) (see exhibit P-1, page 58).

The bankruptcy amounted to $752,489 (see exhibit P-1, page 33). [ 40 ] That is why Denis Fortier requested an investigation by the Royal Canadian Mounted Police (RCMP). [ 41 ] Investigator Jean-Marc Ménard was placed in charge of the RCMP investigation.

He received the three boxes the accused had earlier given the trustee and proceeded with the search and seizure of ten other boxes that were in one of the condominiums built as part of the residential project. [ 42 ] He testified, explaining the content of the exhibits filed by the prosecution, namely, exhibits P-1, P-2, and P-4 to P-7. [ 43 ] As part of his investigation, after studying and verifying the documents in his possession, he observed the following facts: ➢ On May 28, 2003, the Caisse Populaire de Rock Forest granted Monarque a $225,000 loan (see exhibit P-1at 154); ➢ On May 28, 2004, the same Caisse Populaire granted Monarque a $500,000 line of credit (see exhibit P-1at 151); ➢ On December 5, 2006, a letter from the Caisse Populaire to Monarque notified the latter that it was putting a stop to cash advances from the $500,000 line of credit (see exhibit P-4, item 1.14); ➢ That Monarque had an account with the TD Bank Canada Trust bearing number ...; ➢ That on July 5, 2006, the TD Bank Canada Trust notified Monarque by letter that it would proceed to close the account on August 1, 2006, given that the cash that had been deposited was not easily identifiable (see exhibit P-7, item 4.9); ➢ That among the many documents there were several cash transfers from Monarque's account to the accused's company 6988, Novomédia, and the accused personally. ➢ That some of these amounts were considerable, while others were smaller.

➢ That the accused's company 6988 had a bank account with the Royal Bank of Canada; ➢ That in exhibit P-4, item 1.15, a June of 2006 bank statement for Monarque's account indicating cash withdrawals of $20,000 and $51,000 drew his attention; ➢ That he also observed cash entries in Monarque's account for the same amounts, although he was unable to establish the origin of these deposits, despite all the documents in his possession; ➢ That in Monarque's house balance sheet for the period of February 12 to 28, 2006 (see exhibit P-7, item 1.13), and the spreadsheet from Rodrigue Chartier, accountants (see exhibit P-7, item 1.13), there are several entries for "Advances" made to the accused and his company 6988 as well as to Novomédia. ➢ Among the "Advances" entries is one for the amount of $549,474.29, which the accused's company 6988 owes to Monarque (see exhibit P-7, item 1.13). ➢ There is also an "Advance'" of $153,155.30 made to Novomédia (see exhibit P-7, item 1.13). [ 44 ] Based on all of these verifications, Jean-Marc Ménard drew up a list of the amounts of money transferred from Monarque's account to the accused's company 6988, Novomédia, and the accused personally for which he could find no vouchers in Monarque's accounting (see exhibit P-2). [ 45 ] Pierre Boudreau testified that Monarque broke ground on its project in November of 2003. [ 46 ] He adds that Monarque's financial situation was never stellar.

The company had been unprofitable since the beginning. [ 47 ] In 2006, he and the accused agreed that Monarque would proceed with the sale of eight condominiums to the accused's company 6988 to obtain financing. On January 27, 2006, and February 7, 2006, there were two transactions, each concerning four condominiums, before the notary Mtre Michel Lamoureux. [ 48 ] To bring this about, the accused, through his company 6988, managed to obtain a loan from GMAC to provide the liquidity required to complete the project.

GMAC did not want to lend money to Monarque, which was in financial difficulty. [ 49 ] The money lent by GMAC to the accused's company 6988 was sent to the notary Michel Lamoureux, who saw to its distribution to the secured creditors and to its transfer to Monarque's account so that the other creditors could be paid (see exhibits D-2 and D-6). [ 50 ] The hypothecary payments for the GMAC loan were made by Monarque. [ 51 ] The amount of $549,474.29 found in Monarque's statement dated February 28, 2006, is therefore connected to Monarque's sale of the eight condominiums to the accused's 6988 company (see exhibit P-7, item 1.13). [ 52 ] To this effect, the accused, acting for his company 6988, signed two demand promissory notes payable to Monarque (see exhibit D-3). [ 53 ] In actual fact, the amount of $549,474.29 was not reimbursed by the accused's company 6988.

Of the eight condominiums purchased by the accused's company 6988, the only one sold was purchased by Donaldo Gaudette on April 21, 2006 (see exhibit D-8). This condominium is identified as unit 1211-C, the initial price of which was $220,000 (see exhibit D-7), but it was sold for $189,000 (see exhibit D-8). The proceeds from this sale went directly to Monarque. [ 54 ] Pierre Boudreau states that sometime around January of 2006, with the accused's consent, and knowing that there were no funds, he wrote a cheque for $50,000 to the order of Monarque and drawn on the account of the accused's company 6988.

This cheque circulated in three accounts, thus letting Monarque continue business. [ 55 ] Pierre Boudreau explains that when he did so, he knew that the same amount was to be deposited in Monarque's account in the very near future. [ 56 ] Still in connection with the sale of the eight condominiums, a recognition of Monarque's debt to the accused's company 6988 was also signed on February 6, 2006, by Pierre Boudreau and the accused as shareholders in Monarque and by the accused representing his company 6988. [ 57 ] The plan was for Monarque to absorb any loss on the sale of the condominiums, compared to the cost of purchase by the accused's company 6988.

Johanne Marquis, accountant for Monarque, signed this acknowledgment of debt as a witness. [ 58 ] The defence called Mtre Michel Lamoureux, notary in charge of Monarque's project since 2003, to testify. [ 59 ] He was aware that the financial situation of Monarque in early 2006 was precarious, and that the developers, Pierre Boudreau and the accused, needed money. [ 60 ] According to Mtre Michel Lamoureaux, the only remedy was for the accused's company 6988 to borrow money and, to this end, Monarque sold or transferred ownership of eight condominiums to the accused's company 6988.

If this had not been done, Monarque could not have borrowed money to continue operating. [ 61 ] Here is how Mtre Michel Lamoureux explains the goal of the sale of the eight condominiums to the accused's company 6988: [ translation ]

The company 9129-6988 Québec inc. was there to make it easier for Développements Le Monarque to obtain financing to continue its project. That was the goal; it was not for one company to enrich itself at the expense of the other.

It absolutely wasn't that, it's not what I understood, not at all. [ 62 ] As for Pierre Chartier, chartered accountant for Monarque, his role was to prepare a financing project to help Pierre Boudreau and the accused succeed in their residential project. [ 63 ] The plan sought to obtain a bank loan and then to find investors who could either borrow or purchase condominiums. [ 64 ] He prepared the financial statements for the period between February 29, 2004, and February 27, 2006.

He stopped working for Monarque in 2007. [ 65 ] When asked why Pierre Boudreau and the accused each created a management company, Pierre Chartier answered: [ translation ] In the real estate field, you often see people who have management companies to which they transfer excess profits. [ 66 ] Pierre Chartier explains the adjustments he had to do in the spreadsheet he drew up on June 1, 2006, for the period ending on February 28, 2006 (see exhibit D-11). [ 67 ] Based on the house balance sheet he received from Monarque, and after a discussion he had with Pierre Boudreau and the accused, he decided to cancel and subtract the amount of $549,479.29 entered in the current assets. [ 68 ] He explains that this amount could not be included in the current assets because it was a balance receivable that was not realizable. [ 69 ] According to his expert assessment, it was a transaction that inflated the price of the sale so that it could be transferred to another company.

According to generally recognized accounting principles, a condominium complex must be evaluated at the lowest cost of its realization. [ 70 ] Johanne Marquis testified, explaining her role at Monarque. She was the accountant for the company from May of 2004 to December of 2006, at which point she quit because of the company's precarious financial situation.

She was the one who prepared all of Monarque's house balance sheets that have been filed into evidence in the various exhibits. [ 71 ] She explains that the sole aim of the purchase of the eight condominiums by the accused's company 6988 from Monarque was to obtain financing to pay Monarque's suppliers. [ 72 ] She specifies that Pierre Boudreau is not eligible with the credit bureau, and that is why the accused obtained financing through GMAC. [ 73 ] Relying on the first

section of exhibit P-2 concerning the amounts paid by Monarque to the accused's company 6988, Johanne Marquis explains that all of the $1000 amounts entered on the table drawn up by the RCMP represent remuneration paid to the accused. The various payments of $1500 were also remuneration for the accused. [ 74 ] With respect to the fact that these numbers appeared in the spreadsheets where she wrote "Advances", she explains that it was because the accused and Pierre Boudreau were not employees. Strictly speaking, the payments were not wages. [ 75 ] Still referring to the first

section of exhibit P-2, she points out that the amounts of $4,100.56 and $3,768.27 represent hypothecary payments to GMAC following the sale of eight condominiums to the accused 6988. She adds that she was also doing the accounting for the accused's company 6988 at the time. [ 76 ] As for the amounts of $51,000 and $20,000 appearing in the first

section of exhibit P-2, here is how she briefly explains them: [ translation ] The cheques, what we would do since we had four companies, there was one check from Monarque, we would transfer it to 6988, then to Pierre Boudreau and then to Construction Pier, which means that we could gain a few days. The goal was to finance ourselves indirectly through our companies because we knew that there was a payment coming up and there was a supplier who was demanding to be paid.

We really had to give him a cheque, and there was no one who wanted to give us a loan. [ 77 ] Specifically with regard to the circumstances surrounding the cheque for $51,000, she provides the following explanation: [ translation ] Starting with the 6988 company that was doing business with the Royal Bank, we wrote a cheque for $51,000 to Developpements Le Monarque, but the 6988 company didn't have any funds... we knew that there would be money coming in soon. [ 78 ] Referring to the third

section of exhibit P-2, which concerns the amounts paid by Monarque to the accused personally, Johanne Marquis explains that most of the amounts entered were reimbursements of expenses incurred by the accused for Monarque. The accused had the vouchers – invoices, for example – needed to be reimbursed this way. [ 79 ] Johanne Marquis relates that the accused was not remunerated between 2003 and March 10, 2005. He even injected some of his own money to pay the salaries of some of the employees, including her own. Despite his many efforts, Monarque did not succeed. That is why she eventually left the company.

[ 80 ] The accused, a business man, took the stand to explain his version. [ 81 ] He acknowledges all of the figures filed into evidence but denies having any intention to commit fraud. [ 82 ] He files exhibits D-1 to D-23 in support of his evidence. [ 83 ] He explains the many steps he took to find investors in the residential construction project.

Monarque needed financing to complete its multi-million-dollar project. [ 84 ] Without listing all of his activities, the Court finds that he placed ads in the newspaper to attract investors, met with several business people, went to Amsterdam to find potential buyers, and met with real estate agents to promote the sale of the condominiums. [ 85 ] He also explains that, during his application for a loan from GMAC for the purchase of the eight condominiums by his company 6988, he met with an evaluator by the name of Gilles Labrecque, who evaluated the said condominiums.

His evaluation of these condominiums determined that they were worth between $210,000 and $220,000 apiece. [ 86 ] It was on the basis of this evaluation that he determined the sales price of the eight condominiums by Monarque to his company 6988 and entered them in the notarial deeds dated January 27, 2006, and February 6, 2006, before the notary Michel Lamoureux (see exhibits D-6 and D-7). [ 87 ] Seeing that Monarque was at an impasse, the accused withdrew all of his RRSPs for a net of tax amount of $55,000 to pay some of the company's employees. He paid some expenses from his own personal account.

He personally reimbursed the supplier Tapis V.N. because, he says, he had given his word. [ 88 ] He explains that he did not have a chance to work for Novomédia because he was working full-time searching for investors for Monarque, never counting his hours. [ 89 ] Novomédia placed several ads to promote the sale of Monarque's condominiums. This service was never billed and thus never paid for by Monarque. [ 90 ] In his testimony, relying on the first

section of exhibit P-2 dealing with the amounts paid by Monarque to his company 6988, the accused provides essentially the same explanations as Johanne Marquis to justify his transactions. [ 91 ] Still referring to the first

section of exhibit P-2, the accused explains, with the help of the accounting statements of his company 6988, that the withdrawals from Monarque’s account of $10,000 on April 28, 2005, the $20,000 on June 1, 2006, and the $51,000 on June 6, 2006, were indeed deposited in the Royal Bank of Canada account of his company 6988, but that all of these amounts were then re-deposited to be returned to Monarque's account (see exhibits D-22 and D-23). [ 92 ] With regard to the second

section of exhibit P-2, the accused does not contest the amounts entered, but explains that he carried out these transactions with the aim of diversifying the funds in the various accounts. [ 93 ] The accused believed that by advertising the residential construction project, he would greatly help promote the sale of several condominiums. [ 94 ] With respect to exhibit P-2, third section, the accused explains that these amounts are for the most part justified by expenses he incurred for Monarque that he paid for with his personal credit card.

He never withdrew any money from the Monarque account for his own personal benefit. ANALYSIS AND DECISION [ 95 ] The defence files the decision of the Supreme Court in R. v. Zlatic [1] and the prior judgment of the Court of Appeal of Quebec in Zlatic v. R . [2] [ 96 ] It also cites the judgments R. v. Olan and R. v. Théroux . [3] [ 97 ] These three decisions set out the law governing fraud. [ 98 ] The parties agree that the dispute concerns the expression "other fraudulent means" used in subsection 380(1) of the Criminal Code .

The defence maintains that the prosecution has not, through its evidence, discharged its burden of proving that there was fraud or dishonest deprivation as defined in the case law. [ 99 ] For its part, the prosecution alleges that it has met its burden of proof and that the accused committed a fraudulent act equivalent to fraud within the meaning of section 380(1) of the Criminal Code . [ 100 ] It has filed a written argument in which it provides a concise outline of each of its arguments. [ 101 ] It files the judgments in R. v . Théroux , [4] R. v .

Mazur [5] and Location Bristar Idealease Inc. , [6] which it faxed to the Court on the same day as its submissions. [ 102 ] The defence then sent a written response stating that this last decision concerned a civil dispute between creditors in a bankruptcy.

The defence also submits that it does not apply in the case of the accused, who faces charges under the Bankruptcy Act and has not been accused of defrauding the TD Bank or the RBC. [ 103 ] Admittedly, that decision is helpful in that it permits a better understanding of the notion of "kiting", but at the outset, the Court, with respect for the contrary opinion, also finds that this Superior Court decision should not be considered in the analysis of the issue

before the Court, which is: whether the evidence demonstrates beyond any reasonable doubt that the accused had the necessary blameworthy intention to commit the offences charged. [ 104 ] With this in mind, we may now consider the wording of paragraph 198(1) (

a) of the Bankruptcy and Insolvency Act : 198(1) Any bankrupt who (

a) makes any fraudulent disposition of the bankrupt's property before or after the date of the initial bankruptcy event, ... is guilty of an offence; [ 105 ] Subsection 380(1) of the Criminal Code defines fraud as an action which, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of the Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security or any service. [ 106 ] According to the Supreme Court in R. v.

Théroux : [7] To establish the actus reus of fraud , the Crown must establish beyond a reasonable doubt that the accused practised deceit, lied, or committed some other fraudulent act. Under the third head of the offence it will be necessary to show that the impugned act is one which a reasonable person would see as dishonest. Deprivation or the risk of deprivation must then be shown to have occurred as a matter of fact.

To establish the mens rea of fraud the Crown must prove that the accused knowingly undertook the acts which constitute the falsehood, deceit or other fraudulent means, and that the accused was aware that deprivation could result from such conduct. The requirement of intentional fraudulent action excludes mere negligent misrepresentation. It also excludes improvident business conduct or conduct which is sharp in the sense of taking advantage of a business opportunity to the detriment of someone less astute.

The accused must intentionally deceive, lie or commit some other fraudulent act for the offence to be established. (Emphasis added.) [ 107 ] It has often been found in the case law that fraud is a specific intent offence (see R. v. Théroux , Vézina and Côté v. R . and R. v. Lacroix ). [8] [ 108 ] The evidence must demonstrate that the accused's conduct is deliberately dishonest. [ 109 ] In R. v . Théroux , [9] Proulx J.A., discussing the law regarding the mens rea of fraud and referring to a passage from Lacroix v . R. [10] states: [ translation ] In Lacroix v.

R .,(3) this Court, per Roger Chouinard, J.A., clearly showed that in matters involving fraud, [ translation ] "culpable intent must be knowingly dishonest; negligent conduct is not sufficient in such cases". [ 110 ] Further on, Proulx, J.A. added: [ translation ] If the intent to deceive and transfer for fraudulent purposes is relevant, or if the conduct must be deliberately dishonest, then it is a specific intent, where "intent or purpose [goes] beyond the mere performance of the questioned act" as pointed out by McIntyre J.(15) in the excerpt cited above.

If fraud was a general intent offence, the act would be prohibited simply because of a desire to cause dishonest deprivation. While dishonesty or dishonest means as an element of the actus reus are assessed objectively, the analysis of the intent to deceive, the intent to induce into error, or dishonest intent will require a subjective approach. As this Court stated in Lacroix , the abilities and habits of the subject must be taken into account, in addition to the particular circumstances of the case.

(15) Bernard v . R., supra . It is possible for dishonest means to be used but without this necessarily leading to the conclusion that the perpetrator's intent was dishonest. Indeed, this is what was determined in Lacroix , supra , when Chouinard J.A. found the following: [ translation ] In this case, the evidence reveals a number of factors leading to the conclusion that the appellant never had the culpable intent of depriving the bank of any money whatsoever, despite certain, undoubtedly deceitful, manoeuvres using unauthorized credit.(16)

(16) Supra at 816. The awareness of dishonesty or the awareness that the means used are dishonest as an essential element of the mens rea does not signify that the person who commits the action can hide behind his or her subjective assessment of the dishonesty. As I stated above, dishonesty always remains an element of the actus reus that is determined in accordance with objective standards. If the accused argues that the act is not dishonest, he is impugning the actus reus .

If, however, he concedes that the act is dishonest (and that there was deprivation), then the actus reus is proved and it raises the issue of whether the intent to defraud (1) coincided with the dishonest means, (2) includes the awareness that he means used were dishonest, and (3) reflects the intent to deceive, induce into error, or act dishonestly.

(17) To illustrate my point further, I return to Olan , where, after having said that "Using the assets of the corporation for personal purposes rather than bona fide for the benefit of the corporation can constitute dishonesty in a case of alleged fraud by directors of a corporation"

(18) (thus, discussing the a ctus reu s), the Court, in the excerpt cited above, recognized that this raised the question as to whether the evidence reveals that the administrators had the intent to deceive and to transfer the available securities of the company for fraudulent purposes and for their own benefit. The transfer or acquisition of these securities could constitute a dishonest act: it does not necessarily follow that the dishonest act was committed with the intent to deceive.

(17) R. Doherty, "The mens rea of fraud" 25 Cr.L.Q. 348.

(18) R. v. Olan , supra at 1182. [ 111 ] Applying these principles to this case to decide the issue in dispute, the Court must assess the testimony of the accused in the manner outlined by the Supreme Court of Canada in R. v. W. (D). [11] [ 112 ] If the court believes the accused, it must acquit. [ 113 ] If the court does not believe the accused, it must consider whether his testimony raises a reasonable doubt, in light of all of the evidence.

If so, it must acquit. [ 114 ] If the court does not believe his testimony, it must consider whether the evidence of the prosecution proves beyond any reasonable doubt that the accused committed the alleged offences. [ 115 ] That being the case, upon analysis of the totality of the evidence, the Court believes the accused's version. [ 116 ] The accused was candid in his testimony and did not try to sidestep any of the questions asked.

The Court has no reason to question his testimony. [ 117 ] The reliability of his version is confirmed by the evidence as a whole. [ 118 ] No one – not Johanne Marquis, the notary Michel Lamoureaux, the chartered accountant Pierre Chartier, or Pierre Boudreau – testified or demonstrated that a dishonest act tantamount to fraudulent means was committed by the accused. [ 119 ] Certainly the accused's act constituted bad management of the company of which he was an equal co-shareholder with Pierre Boudreau.

He was negligent in the way he managed the business, but he never hid anything whatsoever from anyone at all. [ 120 ] The only goal of all of the acts he committed was to save and finance Monarque and bring the project to completion. [ 121 ] The evidence reveals a number of factors leading to the conclusion that the accused never had the culpable intent to deprive his creditors of any money whatsoever, despite certain undoubtedly questionable manoeuvres that allowed him to keep Monarque alive.

The Court refers in particular to the cheques drawn from a bank account with no funds but with an expectation of receiving funds imminently. [ 122 ] The essence of his testimony, when considered as a whole, expresses his state of mind when he committed the acts described at trial. [ 123 ] The notary Michel Lamoureux and the chartered accountant Pierre Chartier never thought or suspected that the accused committed dishonest acts or had dishonest intent, despite certain erroneous entries in Monarque's balance sheets, the creation of his management company 6988, and the purchase of eight condominiums by his management company. [ 124 ] In addition, the price established for the resale of the eight condominiums was recommended by the evaluator, Gilles Labrecque.

At no time did the accused try to inflate the price suggested by the evaluator. Rather, he complied with the recommended evaluation. [ 125 ] The Court is of the view that, in the circumstances described to the Court, a reasonable person would not consider the acts of the accused to be dishonest. Indeed, as Johanne Marquis has stated to the Court, in the circumstances of the case, she does not understand why the accused was being charged. He did everything he could to prevent the creditors from suffering any harm, and he even paid Monarque's employees out of his own pocket.

He reimbursed the creditor Tapis V.N. from his own RRSPs. Johanne Marquis, who was responsible for the accounting of Monarque and other management companies, never considered the transactions to be dishonest acts. [ 126 ] The Court is also of the view that the accused was not careless.

The goal of all of his actions was solely to pay Monarque's creditors, not to deprive them or to place their money in jeopardy. [ 127 ] The accused sincerely believed that, by committing the acts that were described to the Court, he could enable the continuation of Monarque's project and thus ensure that the creditors would be paid. [ 128 ] It should not be forgotten that, despite the amounts and the exhaustive transactions, Monarque was a company with high sales figures.

Therefore, the commission of a dishonest act is not a conclusion that necessarily follows. [ 129 ] Given the burden of proof on the prosecution, the considerations outlined above are sufficient to decide the issue in dispute: [ 130 ] FOR THESE REASONS, THE COURT: [ 131 ] ACQUITS the accused of the three offences alleged.

__________________________________ HÉLÈNE FABI, J.C.Q. Mtre Myriam Lachance Mandatary of the Director of Public Prosecutions of Canada Mtre Pierre Proulx For the accused Dates of hearing: May 9, July 10 and 11, 2012