ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 1060/11
DATE: 20121019

B E T W E E N:

HER MAJESTY THE QUEEN

Gregory Hendry, for the Crown

• and -

JACQUELINE GLENN

James C. Morton, for the Applicant

HEARD: August 14, 15, 16, and 17, 2012

REASONS FOR JUDGMENT

Fragomeni J.

1The defendant, Jacqueline Glenn is charged with one count as follows:

That she, during a fifteen (15) month period, last, past and ending on or about the 12 th day of January, 2007, at the City of Mississauga, in the Central West Region, did unlawfully steal a sum of money, the property of AKR Consulting Inc., of a value exceeding five thousand dollars contrary to section 334 (a) of the Criminal Code of Canada .

2The Crown alleges that Ms. Glenn cashed a series of cheques made payable to her out of the account of AKR Consulting when she was not entitled to receive the funds. In doing so, the Crown alleges she committed the criminal offence of theft.

3Ms. Glenn’s defence is that she was entitled to receive the funds as she had authority to write and cash the cheques. The cheques were properly recorded in the books and the appropriate taxes were subsequently paid by her for the income she received as represented by the cheques.

THE TRIAL EVIDENCE

Ms. Donna Koabel

4Ms. Koabel owns and operates AKR Consulting. Ms. Koabel has known Ms. Glenn as far back as grade school. They were good friends. Ms. Koabel hired Ms. Glenn to work at AKR to do accounting and administrative work for AKR. AKR is in the business of assisting businesses who are looking to hire people and let them know about government funds available. AKR assists their clients with their applications for obtaining these government grants. AKR receives a fee for helping their clients in this regard.

5Ms. Koabel described her role at AKR as one of finding clients. Ms. Koabel described Ms. Glenn’s duties as managing the office. The maintenance of AKR’s books was Ms. Glenn’s responsibility.

6Ms. Koabel is a Certified General Accountant.

7Exhibit 1 at this trial is a Joint Book of Documents setting out the following:

1. AKR Consulting - General Ledger
2. AKR Consulting - Ledger Account 501 (Jacqueline Steele, Loan Payable)
3. AKR Consulting - Ledger Account 500 (Bonny Koabel, Owner’s Equity)
4. AKR Consulting - RBC Monthly Statements

a. October 2005 (with cheques)
b. November 2005 (with cheques)
c. December 2005 (with cheques)
d. January 2006 (with cheques)
e. February 2006 (with cheques)
f. March 2006
g. April 2006
h. May 2006
i. June 2006
j. July 2006
k. August 2006
l. September 2006
m. October 2006
n. November 2006
o. December 2006

5. Subject Cheques
6. AKR Consulting - T2 Return (Taxation year ending 2006 - 06- 30)
7. AKR Consulting - T2 return (Taxation year ending 2007 - 12- 31)
8. AKR Consulting - Financial Records dated September 28, 2007
9. Documents relating to Share Transfer

a. Email dated January 27 th , 2006
b. Transfer of Shares dated November 24 th , 2006
c. Shareholders’ Ledger & Certificate

10. Email dated October 19th, 2009
11. Letter from CRA dated August 2 nd , 2009
12. Letter from Stringer Brisbin Humphrey dated January 14 th , 2009

8The following list of cheques were identified by Ms. Koabel as being suspect:

Payee
Cheque Date
Cheque Number
Amount

Jacqueline Glenn
10/1/2005
0547
2,000.00

Jacqueline Glenn
11/1/2005
0548
2,000.00

Jacqueline Glenn
12/1/2005
0549
2,000.00

Jacqueline Glenn
1/1/2006
0550
2,000.00

Jacqueline Glenn
5/2/2006
0773
808.92

Jacqueline Glenn
5/5/2006
0774
808.92

Jacqueline Glenn
5/5/2006
0775
808.92

Jacqueline Glenn
5/5/2006
0776
808.92

Jacqueline Glenn-Steele
9/18/2006
1044
1,000.00

Jacqueline Glenn-Steele
9/29/2006
1075
880.59

Jacqueline Glenn-Steele
12/21/2006
1298
880.59

Jacqueline Glenn-Steele
1/12/2007
1365
811.94

Total
14,808.80

9It was noted that each cheque was prepared and signed by Ms. Glenn

10In essence Mr. Koabel testified that Ms. Glenn had no authority to write herself these cheques and that the cheques were recorded in the books in such a fashion that Ms. Koabel would not know or suspect that Ms. Glenn was improperly taking the funds.

11Ms. Koabel testified that there was no agreement that Ms. Glenn could pay herself bonuses or additional wages and that in doing so she acted without her authority. Ms. Koabel did not authorize any pay advances. Ms. Koabel testified that Ms. Glenn was not entitled to receive multiple weekly payments for her salary.

12On October 19, 2009 Ms. Koabel sent to Ms. Glenn the following e-mail:

From: Bonny Koabel [ mailto:bonny@flexomark.com ]
Sent: Monday, October 19, 2009 4:57 PM
To: Jacqueline Steele
Subject: Change in Signing Authority

Jacqueline,

Please note I have changed Signing Authority of the AKR bank account to myself only.

I have serious concerns about the amount of money you have taken from the company in the past year. In August last year it was agreed we were begin taking equal amounts of money from the company. Because of cashflow, I asked you to reduce the monthly payments to me, I have even been asked to put money in the company, yet you have continued to take out your monies on a timely basis. You have taken the following monies since September 1, 2009:

Salary $108,000.00
Loan Account 30,000.00
Car Payment 12,000.00

$150,000.00

I, in contrast have taken $90,000. Is this fair? There is a $60,000 difference, and I have borrowed money on my line of credit, and Visa. AKR has not paid for the excess mileage for my vehicle, yet AKR pays the financing on your vehicle. I was to have my car financed by AKR, yet the company could not afford this. You are paying for your children’s schooling through AKR, I paid for my children’s schooling out of my own pocket. You have asked things for of me, you would never have done yourself, would you have given ownership in this company? You nagged me for shares I had no desire to give you, and I have never ever received a penny for this.

This is exactly why I did not want to give you any ownership in the company, I knew this would happen.

As the majority shareholder I am asking you how you intend to pay me back this $60,000, and that is only since September 2008?

Secondly, as the majority shareholder I am informing you there will be major salary changes forth coming, beginning with cancellation on preauthorized cheques to Tall Pines as of January 1, 2010. My focus is paying down all outstanding debts including monies owed to the Government for back taxes, the TD line of credit in my name, the $15,000 owed to me personally that I have lent the company in the last year, and lastly the line of credit.

13By letter dated June 15, 2011 from Canada Revenue Agency, Ms. Glenn was notified of the following:

June 15, 2011

JACQUELINE GLENN-STEELE
56 TOBA CRES
BRAMPTON ON L6Z 4R7

Dear Ms. Glenn-Steele:

Re: Income tax return for the period 2008-01-01 to 2008-12-31

Based on our audit of AKR Consulting Inc., we propose the following adjustments be made to your personal income tax return:

Adjustments to T1 returns 2008

Loans to be included in income $56,253
Interest benefit $ 1,614

Total Increase to Taxable Income $57,867

The explanations for these adjustments are as follows:

Shareholder loans to be included in income

during the taxation years noted above, you received loans from AKR Consulting Inc. in your capacity as a shareholder. Based on the review of the shareholder loan account, a portion of the loans received in 2008 was not repaid by the end of 2009. You will be required to include this amount in income for 2008 pursuant to subsection 15(2) of the Income Tax Act (“ITA”). Please refer to the attached worksheet for details.

Interest benefit

We have also determined that you received a taxable benefit as a result of receiving loans that were non-interest bearing. Pursuant to subsection 15(9) of the ITA and in conjunction with section 80.4, where an amount in respect of a loan or debt is deemed by section 80.4 to be a benefit received in a taxation year by a person, the amount is deemed to be benefit conferred in the year on a shareholder. Interest was calculated at the prescribed rates for the year on the total loans outstanding during the year. Please refer to the attached worksheet for details.

Our records show that you have not filed your 2009 and 2010 income tax returns. This is a reminder that it is your responsibility to comply fully with your tax obligations.

Reassessment of the proposed audit adjustments will now be deferred for a period of thirty (30) days from the date of this letter in order to enable you to submit, in writing, any additional information or explanation you may wish to have considered. Failure to respond to this letter by July 15, 2011 will result in reassessment notices being issued on the above-noted basis.

If you have any questions regarding the aforementioned proposals, please contact me at 416-410-1819.

Sincerely,

Maggie Chiu

Maggie Chiu
Audit Division
Tax Services Office: 62 - Toronto West

Telephone: 416 - 410-1819
Facsimile: 905 - 803-7214

Address: 5800 Hurontario St
Mississauga, ON L5R4B4

Internet: www.cra.gc.ca

Enclosures

Cross-Examination of Ms. Koabel

14In cross-examination Ms. Koabel acknowledged that the AKR bank statements were sent by the bank to her home. Ms. Koabel instructed the bank to do that. Ms. Koabel stated that despite having the statements sent to her home she never looked at them as she trusted Ms. Glenn.

15Ms. Koabel acknowledged further that all of the disputed cheques are in fact recorded in AKR’s books and records.

16Ms. Koabel was asked about her knowledge of the Financial Statements for AKR as at June 30, 2007. These statements are set out at Tab 8 of the Book of Documents. She could not say if she received them or saw them. She said she trusted the people who put these Financial Statements together. She did acknowledge, however, that she did sign the T 2 tax return for the taxation year ending December 31, 2007 as the authorizing signing officer of the corporation.

17In further cross-examination Ms. Koabel stated that she had retained civil counsel in January 2010. On January 14, 2010 her lawyer sent the following letter to Ms. Glenn:

January 14, 2010

WITHOUT PREJUDICE

VIA COURIER

Jacqueline Steele
56 Toba Cres.
Brampton, Ontario
L6Z 6R7

Dear Ms. Steele:

Re: AKR Consulting Inc.

We represent your former employer, AKR Consulting Inc. (“AKR”). AKR has learned that you solicited the business of a key client, Comstock, and have entered into an agreement through your new company, Sovereign Financial Consulting, to perform work for Comstock. This is a violation of your continuing duties to AKR.

You continue to owe a fiduciary duty to AKR by virtue of the senior managerial position you occupied and the fact that you were a director of the company as well as a shareholder. A fiduciary duty continues following termination of the employment relationship. This means that you have a continuing duty not to solicit AKR’s clients or to compete unfairly against AKR.

The duty not to compete unfairly is quite broad and includes that you must not use information you acquired during your employment with AKR to compete against it. You have apparently used your knowledge of AKR’s pricing with Comstock to acquire its business.

Your actions expose you and your new company to an action from AKR for its damages resulting from its loss of Comstock as a client. AKR is also in a strong position to seek a court order restraining you from any further solicitation of its customers and from competing unfairly against AKR.

I also understand that you converted for your personal use a significant sum of money from AKR during your employment. Although this is a separate legal issue from your recent solicitation of Comstock, your actions have only compounded your potential exposure to liability to AKR.

AKR is prepared to refrain from commencing an action against you and your new company for your solicitation of Comstock as a client if you agree to cease performing work for Comstock immediately and to release Comstock from the services contract your company has entered into with Comstock. If you are prepared to do so, please sign this letter below and return a copy to me within seven days. If I do not receive this document signed by you within seven days, my client will assume that you intend to continue your relationship with Comstock and will commence legal proceedings forthwith.

Note that AKR is reserving all rights to pursue legal proceedings against you for your conversion of funds and for any other solicitation of AKR’s clients by you or any business associates that may come to its attention.

I trust that this makes AKR’s position in this matter clear.

Yours very truly,

STRINGER BRISBIN HUMPHREY

Landon P. Young

Landon P. Young

I, Jacqueline Steele, agree to cease performing all work for Comstock, either directly or indirectly, either in my own capacity of in the capacity as an employee, agent, independent contractor or consultant with any other person or entity, and will release, or will cause Sovereign Financial Consulting to release, Comstock from any contract under which services were to be provided to Comstock. I agree to provide AKR with a copy of the agreement providing for such release.

Date Jacqueline Steele

18Ms. Koabel attended at the police station on January 8, 2010. Charges were laid in April 2010.

19In further cross-examination the following e-mails as set out in Exhibit 3 of the trial were identified:

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...

57In all of these circumstances, therefore, there will be a finding of Not Guilty.

Fragomeni J.