Supreme Court of Canada
Lilly v. The Queen, [1983] 1 S.C.R. 794
William Robert Lilly Appellant;
and
Her Majesty The Queen Respondent.
1982: December 15, 16; 1983: June 23.
Present: Dickson, Beetz, Estey, McIntyre, Chouinard, Lamer and Wilson JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN
Criminal law—Theft—Monies deposited in trust with respect to real property transactions—Colour of right defence—Charge to jury—Misdirection—New trial ordered—Criminal Code, R.S.C. 1970, c. C-34, ss. 283, 294 (rep & sub. 1974-75-76 (Can.), c. 93, s. 25).
Appellant, a licensed real estate broker, was convicted of theft of $26,759.58, being sums deposited “in trust” with respect to real property transactions. The appellant relied, for 18 of the 21 transactions involved in the count on which he was found guilty, on the defence of colour of right alleging he thought he could lawfully transfer the amounts from the “in trust” account to the agency’s general account once the offer to purchase the property had been accepted. As to the other transactions involving a total of $13,500 he relied on an alleged lack of knowledge of the transfers. The Court of Appeal dismissed appellant’s appeal. This appeal is to determine whether the trial judge misdirected the jury as to the meaning of the phrase “colour of right”.
Held: The appeal should be allowed and a new trial ordered.
In his charge, the trial judge misdirected the jury. The fate of the appellant’s defence of colour of right was not dependent upon the jury determining when the commissions were payable. Rather, the defence was dependent upon whether the jurors were satisfied beyond a reasonable doubt that the appellant had not, at the time of the transfers, an honest belief that he had the right to that money, and not, as they were told, dependent upon what they thought his rights were. Further, the conviction cannot stand for it was impossible to know whether the conviction stood solely on those transactions that did not raise the defence of colour of right.
[Page 795]
APPEAL from a judgment of the Saskatchewan Court of Appeal dismissing the appellant’s appeal from his conviction on a charge of theft. Appeal allowed and new trial ordered.
Peter Foley, for the appellant.
Audrey S. Brent, for the respondent.
The judgment of the Court was delivered by
Introduction
LAMER J.—William Robert Lilly, a licensed real estate broker, was convicted by a Saskatoon jury of theft of $26,759.58, monies that had been deposited in trust with Lilly Agencies Ltd. with respect to various real estate transactions. He appealed his conviction without success to the Saskatchewan Court of Appeal and was thereafter granted leave at large to appeal to this Court.
As I am of the view that he should succeed on one of the grounds argued by him in this Court, I need not refer to those other grounds and will limit reference to facts and procedures to those relevant to that ground of appeal and its determination.
The Charge
Charged with two counts of theft he was acquitted of one and found guilty of the following:
That he, the said William Robert Lilly, between the 1st day of October, A.D. 1977, and the 2nd day of March, A.D. 1978, at the City of Saskatoon, in the Province of Saskatchewan, did steal approximately Twenty Six Thousand, Seven Hundred and Fifty Nine Dollars and Fifty Eight Cents ($26,759.58), more or less, being sums deposited in trust with Lilly Agencies Ltd. with respect to real property transactions involving the sale or lease of various real property, contrary to Section 294(a) of the Criminal Code.
This amount of $26,759.58 is the amount of money the Deputy Superintendent of Insurance for Saskatchewan felt, following an audit of the agency’s books, had been misappropriated by the accused. This conclusion was based on the view that the deposit on a real estate transaction must remain in trust until the transaction is completed. This view is not in dispute before this Court.
[Page 796]
The aggregate amount of deposits given the accused’s agency by clients in some twenty-one transactions was $28,851.10. As there remained at the time of the audit in the trust account an amount of $2,091.52, the indictment was for the difference.
Appellant does not pretend that he was entitled in law to the amounts transferred from the “in trust” to the agency’s general account. He says that he either was not aware of some of the transfers, or, in the case of others, says that, whilst aware of them he thought he was in law entitled to so transfer the amounts as he was of the belief at the time that he could lawfully do so once the offers to purchase the property had been accepted.
Of the twenty-one transactions involved in the count for which he was found guilty, there are three, for an aggregate amount of $13,500, where, in the course of his being cross-examined by the Crown, he does not plead “colour of right” but only ignorance of the fact that the amounts had been transferred.
Colour of Right Defence
The ground upon which appellant should succeed in this Court is stated as follows:
The learned trial judge erred in law in misdirecting the jury as to the meaning of the phrase ‘colour of right’.
The trial judge, in his charge to the jury on that aspect of the law relevant to this case, first said:
The phrase ‘colour of right’ simply means a bona fide belief or an honest belief. And a bona fide belief or an honest belief may arise from a genuine mistake or in some cases even from ignorance. Therefore the phrase in the definition of theft, ‘without colour of right’, simply means the lack of a bona fide or honest belief. It is up to you to determine from the evidence whether the accused, in regard to Count No. 1 acted dishonestly and without colour of right when monies were taken, as is alleged, from the trust account of the company to the general account. You will note that the definition reads ‘fraudulently and without colour of right’ takes, not ‘fraudulently or [without] colour of right’ takes. If you find that the accused did take the monies and the actions of the accused were fraudulent and without colour of right, and that he took the said monies from the trust account with intent to deprive the owner, you
[Page 797]
must—you, in that case, would find the accused guilty of Count No. 1.
He then dealt very fairly and accurately with appellant’s defence of lack of awareness of any shortage in the “in trust” account, and then referred again to the accused’s defence of colour of right as follows:
The accused appears to me to take a second position and that is if you find that the accused was aware of lump sums withdrawals from the trust account not related to commissions earned, that is knew the trust account to be overdrawn, the accused says that such withdrawals were not fraudulent and that there was a colour of right to make those transfers. You will have Exhibit P-21 before you and the shortages alleged by Mr. Childs together with the files… The accused’s position appears to me to be that the company was entitled to apply these deposits on commissions when the vendor accepted the Offer to Purchase. As I recall, in all cases listed by Mr. Childs, except the Suburban Golf Course, the deposit was less than the company’s total commission, providing of course that the sale did go through. And certainly the evidence was that the vast majority of these sales did go through.
The real question insofar as this defence is concerned is when was the commission, or a portion thereof, payable to the company. There is evidence before you which suggests that a sale is completed on the date of possession. There is evidence, I believe, that if there be no conditions set out in the Offer, commission is payable on the date the vendor accepts the purchaser’s offer. There is some evidence to suggest that commission is not payable until the lawyer handling the sale advises the agent that all matters in connection with the sale have been completed.
(Emphasis added.)
He told the jury that the time of payment was primarily a question of fact to be determined by them and then referred again to the accused’s defence:
As I understand the accused’s position, he says the company had a colour of right to transfer money to trust which represented commissions, or a portion thereof, when the Offer to Purchase was accepted by the pur-
[Page 798]
chaser. In other words the accused had a bona fide or honest belief when the Offer was accepted that he could, as President and Manager, remove monies representing a portion of the company’s commission to the company’s general account, as the money represented earnings of the company. The Crown, however, as I understand their position, take the position that a sale must be completed prior to any commission being earned. If, for example, you have an Offer with no conditions attached, such as subject to arranging finances, the commission would be, I believe, payable, according to the Crown’s proposition, on the date of possession. Or, for example, if a lawyer representing the vendor advised the agent that the sale was completed, then the commission becomes payable.
There is in Mr. Childs’ list of shortages in the trust account sales involving D & K Construction and Symak Construction. It appears to me, and this is only my recollection, you look at the files and determine for yourself, but it appears to me that when the Offer in these cases was accepted by the vendor the residence was either then under construction or construction had not commenced. Possession in some of these cases was available, as I recollect, and you will examine the facts, six or eight months after the Offer was accepted by the vendor. The question is does the agent have to wait six or eight months for his commission or is it payable on acceptance of the Offer. That is a question for you to resolve. If you find commission to be payable on completion of the transaction, for example, possession being given, it appears to me that no monies representing the commission should be transferred until the agent has been so advised. However, it is up to you to determine if the company, through the accused, had the right to transfer the commission from the trust account to office at the time such transfer was made.
(Emphasis added.)
Analysis
With respect, this is clearly, in my view, misdirection in law. The fate of the accused’s defence of colour of right was not dependent upon the jury determining when the commissions were payable. That question was indeed important as relevant to whether the monies were his or those of his clients. The fact that they still be the property of the client was a prerequisite to his having to raise a defence to the taking or conversion. Rather, the accused’s
[Page 799]
defence was dependent upon whether they, the jury, were satisfied beyond a reasonable doubt that he, the accused, had not, at the time of the transfers, an honest belief that he had the right to that money, and not, as they were told, dependent upon what they, the jurors, thought his rights were.
The Crown's Alternative Argument
Respondent Crown, whilst supporting the judge’s charge on colour of right, argues that, if this Court were of a different view, the conviction should still stand, as this defence did not arise for $13,500 of the $26,759.58, as the appellant had admitted that for the three transactions comprising that amount he relied only on his lack of knowledge of the transfers from the “in trust” account to the general account. This argument is at first sight appealing and in fact was the basis for the Saskatchewan Court of Appeal’s decision, but cannot resist closer consideration. Indeed this reasoning seems to me to be overlooking three facts. First, the Crown chose not to identify the transactions into separate counts. That is the right of the Crown and was understandable given the fact the transfers were for sums that did not correspond to identified deposits. However, after cross-examining the accused, it had become apparent through his answers that there were, as of then, two groups of transactions to be considered, one raising and the other not the defence of colour of right. It would have been preferable to sever the count at that stage. Indeed, had the trial been before a judge sitting without a jury, the matter would have been dealt with by him in the reasons for judgment, or again the verdict might well have been one of guilt for the lesser amount of $13,500, the implication being clearly that the defence of colour of right had succeeded when applicable and that of “lack of knowledge” failed when standing alone. But we are here dealing with a jury, which is the second fact I refer to.
[Page 800]
Juries do not give reasons. Furthermore, they were not told they could find the accused guilty for a lesser amount if satisfied that for some of the transactions the defence of colour of right had been successful. Rather, and this brings us to the third fact I wish to allude to, they were told by the trial judge, in the course of his charge to them, that “you are not required to find the exact amount stolen but you are required to find that in this case the amount stolen exceeds $200.00 under each charge” (by “each charge” he was referring to each of the two counts in the indictment). This, I hasten to say, is not misdirection. However, when there is, as in this case, a defence of colour of right applicable only to some of the transactions, this direction in conjunction to a misdirection as to that defence has the following effect: not knowing whether the jury’s verdict of guilty was for one, or more, or all of the transactions, the verdict could well be resting on one of those transactions where the defence of colour of right was available and concerning which I have found clear misdirection.
Disposition
I would therefore allow this appeal, quash the conviction and order a new trial. At first, I had thought of severing the count before returning the file to the Court below. After some reflection upon the matter, I think it preferable to leave the matter to the trial judge in the light of what the Crown might choose to do or the defence request be done to the charge.
Appeal allowed and new trial ordered.
Solicitors for the appellant: Gauley & Co., Saskatoon.
Solicitor for the respondent: Audrey S. Brent, Regina.
