2010 NLCA 29, 2010 NLCA 29

Date: 2010 0427 Docket: 09/19 Citation: 2010 NLCA 29 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : HER MAJESTY THE QUEEN APPELLANT AND : DAVID FREDERICK WARREN RESPONDENT Coram: Green, C.J.N.L., Roberts and White, JJ.A. Court Appealed From: Provincial Court of Newfoundland and Labrador, St. John’s Appeal Heard: March 12, 2010 Judgment Rendered: April 27, 2010 Reasons for Judgment by White, J.A. Concurred in by Green, C.J.N.L. and Roberts, J.A. Counsel for the Appellant: Stephen R. Dawson Counsel for the Respondent: Derek Hogan

White, J.A: [ 1 ] This is an appeal by the Crown from the acquittal of the respondent (David Warren) on two counts of fraud. [ 2 ] The issue is whether the learned trial judge erred in her application of the law of fraud to the facts as found by her. Background [ 3 ] The scam which gave rise to the matters under appeal involved solicitations by Mr. Warren for investment in “advanced laser technology”. [ 4 ] The essence of the representations made by Mr. Warren are set out in the trial judge’s decision: Mr.

Warren represented to them that he had been given the opportunity to participate in massive profits from the sale of leading edge laser equipment designed for the purpose of performing non invasive surgery, including heart surgery, which allowed for a much safer surgical procedure and much faster recovery time.

There were, he told them, eight prominent local doctors who held the Canadian patent for these machines and were selling them all across Canada so quickly that he and others who had invested through him were receiving their money back plus profits of 30%, 50% and at some points even 100% within a matter of weeks. The doctors, he said, did not want to be identified, and would only accept participating and investment from and through him, and not from anyone else. (Transcript, Vol. IV, pp. 1221-1222) [ 5 ] The trial judge reviewed the charges as follows: There are four charges on two informations.

From the outset it was agreed the informations would be tried together. In order of offence dates alleged, the informations are as follows: Information # 1 – This is a two count information wherein it is alleged that between the 25 July 2003 and 9 February 2004: Count # 1 – The accused committed the indictable offence of defrauding David Squires of money in excess of $5000.00 contrary to section 380(1) (

a) of the Criminal Code of Canada . The facts that give rise to this charge are that between the dates alleged, Mr. Warren received bank drafts (payable to his company, Genesis Biotech Industries) totaling $125,000.00 from Mr. Squires for investment in advanced laser technology, and that Mr. Squires was led to expect a quick return on his money together with a huge profit. The allegation is that no investment in advanced laser technology occurred and it is a fact that the complainant has not received any of his money back, let alone anything by way of profit as he was led to expect.

Count # 2 – The accused committed the indictable offence of defrauding Marty Squires of money in excess of $5000.00 contrary to section 380(1) (

a) of the Criminal Code of Canada . The facts that give rise to this charge are that the accused received a Bank draft in the amount of $20,000.00 dated 12 September 2003, from Mr. David Squires on behalf of his brother Marty Squires, payable to David Warren for investment in advanced laser technology, with the promise of a quick return of his money together with a huge profit. It is alleged that no investment in laser technology occurred and it is an undisputed fact that none of this money was returned to either Mr. David Squires or to Mr.

Marty Squires, nor did they receive any fee or interest on the money they advanced. The Crown alleged that in both instances the money was instead used by Mr. Warren for his own purposes. Neither David Squires nor Marty Squires have recovered any of the money given to Mr. Warren, nor have they received any fees, interest or any other reward for the advance of the money as they were led to expect.

Information # 2 – This is a two count information wherein it is alleged that: Count # 1 – On the 13 July 2004 David Warren committed the indictable offence of defrauding Joseph Greene of an amount of money in excess of $5000.00 contrary to section 380(1) (

a) of the Criminal Code of Canada . The facts that give rise to this charge are that on 13 July 2004, Mr. Greene gave David Warren a cheque of the same date payable to David Warren in the amount of $36,000.00 for investment in advanced laser technology, having been led by Mr. Warren to expect a quick and high rate of return; and Count # 2 – On 5 May 2005 David Warren committed the indictable offence of defrauding Joseph Greene of an amount of money in excess of $5,000.00.

The facts which give rise to this offence are that on 5 May Joe Greene gave David Warren a cheque of that date in the amount of $6000.00 payable to David Warren. Mr. Warren was to forward this money to his relative in the States for the repair and sale of a gambling machine which Mr. Warren claimed would generate money which he said would “leverage” repayment of the original $36,000.00. The Crown alleged that this money was never sent to the relative in the States but was kept by Mr. Warren for his own purposes. On 15 October 2004, Mr. Warren repaid Mr.

Greene $3000.00 on account of the $36,000.00 advanced to him by Mr. Greene on 13 July 2004 (count # 1). He subsequently also initiated a civil action against Mr. Warren arising out of these events and on 8 December 2005 a default judgment was issue out of the Supreme Court of Newfoundland and Labrador in the amount of $48,000.00 together with interest and costs to be taxed. (Transcript, Vol. IV, pp. 1213-1216) [ 6 ] In particular, the appeal is of the trial judge’s acquittal of Mr. Warren relative to the charge involving Marty Squires and one of the charges involving Joseph Greene.

Relevant to the issues before this Court are funds received by Mr. Warren originating with David Squires ($125,000), his brother Marty Squires ($20,000) and Joseph Greene ($36,000). The Law and Analysis

[ 7 ] Section 380(1) (

a) of the Criminal Code reads: 380.

(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 or any service, (

a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding fourteen years, where the subject-matter of the offence is a testamentary instrument or the value of the subject-matter of the offence exceeds five thousand dollars;… David Squires [ 8 ] Before dealing with the trial judge’s acquittal of Mr. Warren on the charge of defrauding Marty Squires, it is helpful to review her findings with respect to her conviction of Mr. Warren on the charge involving David Squires. [ 9 ] In finding Mr.

Warren guilty of defrauding David Squires of $125,000 the trial judge stated: The Crown has established beyond a reasonable doubt that $125,000 was given to David Warren and deposited in the bank account of Genesis Bioplex. They were used by David Warren for his own purposes, and not invested in any laser technology venture as he had promised to do. ….. Even if there were others involved in this to whom Mr. Warren was giving money (and I don’t believe there were), by his own admission he lied to the complainant David Squires about the name of this person. There was certainly dishonesty and deceit.

There also cannot be any doubt from the evidence that there was deprivation as a result of his deceit, as Mr. Squires has not received any of his money back. (Transcript, Vol. IV, p. 1246) Marty Squires [ 10 ] While finding Mr. Warren guilty of defrauding David Squires of $125,000, the trial judge acquitted him of defrauding Marty Squires of $20,000. There is no finding that Marty Squires’ funds were used for a legitimate investment. To the contrary, the trial judge accepted that his money went into Mr. Warren’s pocket just as David Squires’ money did.

The only difference on which the trial judge relied was that it was David Squires who initially told Marty Squires about Mr. Warren’s proposal – not Mr. Warren directly. Marty Squires lost his money in the same overall fraud as did David Squires. There is nothing to suggest David Squires was part of the fraud – he was a mere initial conduit. [ 11 ] Counsel for Mr. Warren argued that because the connection between Marty Squires and Mr. Warren was “remote or tenuous”, the trial judge was not satisfied beyond a reasonable doubt that Mr.

Warren’s dishonesty was “the operative cause of a deprivation, or risk of it, to Marty Squires”. Counsel further suggests that: “In any case, an ambiguity as to whether (the trial judge) properly applied the law is to be resolved in favour of (Mr. Warren)”. [ 12 ] With respect, I can find no ambiguity. Section 380(1) (

a) of the Criminal Code clearly applies. Mr. Warren knew he was engaging in conduct which is prohibited (deceit, falsehood or other fraudulent means) and the effect of his conduct was to defraud a person of money. The

section is also clear that the person (i.e. the object of the conduct) need not be “ascertained”. It could be a person unknown to him at the time he put forward the misrepresentation which ultimately caused deprivation. If Mr. Warren had solicited funds over the internet for his scam, this would not overcome his being the operative cause of depriving those who sent him money. [ 13 ] The dishonest act was carried out through the innocent medium of David Squires. Marty Squires knew where the money was supposed to go when he gave it to David Squires to pass on to Mr. Warren.

It was for investment in advanced laser technology as fraudulently promoted by Mr. Warren. [ 14 ] Logic does not imply that an accused person ascertain who he is defrauding. Most significantly, the law does not require it ( s. 380(1) (

a) of the Criminal Code ) or make it necessary to establish a direct connection between the accused and a particular complainant, as stated by Lamer J., in R. v. Côté, 1986 CanLII 93 (SCC) , [1986] 1 S.C.R. 2, at para. 33 : Fraud consists of being dishonest for the purpose of obtaining an advantage and which results in prejudice or a risk of prejudice to someone’s “property, money or valuable security”. There is no need to target a victim to commit fraud, and the victim may not be ascertained. A direct misrepresentation by the accused to the victim is not a required element of the offence. ( See also R. v.

Chris (1984), O.A.C. 142). [ 15 ] But for the fact that Mr. Warren did not have any prior contact with Marty Squires before he passed over the $20,000 to be given to Mr. Warren, it is clear that the trial judge would have treated Marty Squires exactly as she treated David Squires. That being so, having erroneously concluded that the law required contact, and since it is clear that need for contact is not sustainable at law, it is inevitable (on the basis of her approach to the matter) that an acquittal cannot be justified. [ 16 ] Accordingly, as the trial judge erred in law, the acquittal with respect to Mr.

Warren’s defrauding of Marty Squires must be set aside. Joseph Greene [ 17 ] Mr. Warren’s testimony indicates that he treated Joseph Greene’s money in the same way as that of David Squires. In other words: get the money from a duped investor and then tell him that it was passed on to the laser technology developers. When really pressed, he would pay back some money or convince the investor his original investment and return should be rolled over in anticipation

of even greater returns. (See Transcript, Vol. IV, pp. 1103-1107) [ 18 ] In dismissing the charge the trial judge stated: It is evident from the documentation filed in exhibits in this matter that Mr. Greene had previous dealings with Mr. Warren and was highly skeptical of the whole scheme from the outset. I accept that, like Mr. Squires he was told about the sale of laser technology and was also given the names of Duke and Pooley, but he also testified that there was mention of Rodney Black, who he seemed to know. Mr. Greene made his cheque payable to Mr.

Warren (not Genesis), and drew up a document that he characterized, on it’s face, as a demand loan-promissory note which he had Mr. Warren sign. Mr. Warren personally guarantees repayment to Mr. Greene. It is obvious as well from the correspondence entered into evidence that Mr. Greene raised money for this loan to Mr. Warren from others, as well as putting some of his own resources in. He then sued civilly and has a default judgment. We are all free to loan money to others, and a failure to repay does not mean a criminal offence has occurred. It is arguable that Mr.

Greene saw this as a civil transaction, and his role in the advanced laser technology enterprise, if any, is not clear to me. Also, we do not have the comprehensive bank records or as clear a picture of this transaction as we do of the David Squires matter, and I must give the benefit of any doubt to the accused. Consequently, I have dismissed this charge. [Transcript, Vol. IV, pp. 1247-1248] [Underlining added] [ 19 ] Upon questioning by the trial judge Mr. Warren stated that Mr. Greene had previously invested $20,000 in the scheme and had received $40,000 back. She then further questioned Mr.

Warren as follows: Q. Alright. Did he invest anything after that? A. Yes he did. He gave me a cheque for $36,000 probably about six or seven months after that. [Transcript, Vol. IV, p. 1107] …. Q. And Mr. Greene, you’re claiming, you did give him $40,000 cash? A. That is correct, yes. Q. And he gave it back to you? A. No, no. Some five, six months later, he invested another 36. I don’t know where that came from, but he gave it to me in cheque form. [Transcript, Vol. IV, p. 1109] [Underlining added] [ 20 ] Clearly, the money obtained from Mr.

Greene was obtained as part of the overall scheme, just as was the money from David Squires and Marty Squires (i.e., for “investment” in advanced laser technology). [ 21 ] This is further confirmed by Mr. Greene’s own testimony: Q. Okay, how many conversations did you have with Mr. Warren about doing this investment? A. It would’ve been several. Q. Do you know over what period of time? A. Probably over a month or more or at least several weeks. On and off, as I said he was pretty persistent and pretty convincing. Q. Were they phone meetings or were they personal meetings? A. Phone primarily, yeah, telephone. Q.

Okay and when did you decide to invest in this? A. It would’ve been in July of 2004 and that would’ve been the first transaction there which I guess has already been admitted into evidence. Q. Okay, right, and I guess, why did you invest ? A. Well, you know, to me it seemed like it was okay, it was solid sound and you know obviously with the hopes of making a little return on it. I mean that’s why business people do what they do.

[Transcript, Vol. I, p. 266] [Underlining added] [ 22 ] The trial judge refers to Mr. Greene as “highly skeptical of the whole scheme from the outset”. Skeptical or not, he passed the money over to Mr. Warren. To repeat what the trial judge said: “I accept that, like Mr. Squires he (Greene) was told about the sale of laser technology…”. She then goes on to refer to Mr. Greene’s making his cheque payable directly to Mr. Warren; obtaining a “demand promissory note” signed by Mr. Warren; and, the fact that Mr. Greene sued civilly and obtained a default judgment.

All this leads to her conclusion: … We are all free to loan money to others, and a failure to repay does not mean a criminal offence has occurred. It is arguable that Mr. Greene saw this as a civil transaction… [ 23 ] I agree with the trial judge that Mr. Greene must have seen this as a civil transaction. Otherwise, he could only have seen it as one of a criminal nature. It was, from Mr. Greene’s position, in fact a civil transaction, but was one induced by Mr. Warren’s fraudulent misrepresentations. [ 24 ] In any event, Mr.

Greene’s perception of the investment as a “civil transaction” does not preclude the possibility of a criminal conviction. (See R. v. Finn (1996), 1996 CanLII 6632 (NL CA) , 106 C.C.C. (3d) 43, a decision of this Court, upheld by the Supreme Court of Canada, R. v. Finn , 1997 CanLII 398 (SCC) , [1997] 1 S.C.R. 10). [ 25 ] It is clear that Mr. Greene gave the funds to Mr. Warren based on Mr. Warren’s representations relative to the existence of the advanced laser technology enterprise. Mr. Greene’s skepticism, taking of additional security, and obtaining of a civil judgment does not change the nature of Mr.

Warren’s actions. Mr. Greene was induced to invest in a fraudulent scheme invented by Mr. Warren. There is nothing to indicate that this was of the nature of a loan to Mr. Warren. Mr. Greene would not have provided the funds to Mr. Warren except for high returns he anticipated from the funds being passed on to an enterprise that Mr. Warren represented to him as existing, but which in fact did not exist. The learned trial judge erred in characterizing the transaction as a loan and in concluding that such characterization somehow meant that Mr.

Warren’s actions were not criminal in nature. [ 26 ] The acquittal with respect to Mr. Warren’s defrauding of Joseph Greene is set aside. [ 27 ] Both counsel agreed that if this Court overturned the acquittals, convictions should be entered with the matter of sentencing referred back to the trial judge. This Court has authority to do so. (See R. v. Ford , 2007 NLCA 34 ; R. v. Nuttal (1994), 1994 CanLII 9716 (NL CA) , 115 Nfld. & P.E.I.R. 79 (Nfld. C.A.) and s. 686(4) (b)(ii) of the Criminal Code ).

Conclusion [ 28 ] The acquittals having been set aside, in the circumstances verdicts of guilty are entered in respect of the charges that Mr. Warren defrauded Marty Squires of $20,000 and Joseph Greene of $36,000. The matters are remitted to the trial court to impose sentences that are warranted in law. ___________________________ C.W. White, J.A. I concur: ________________________ J.D. Green, C.J.N.L. I concur: _________________________ D.M. Roberts, J.A.