CITATION: R. v. Hunking, 2016 ONSC 1749
COURT FILE NO.: 2219/12
DATE: 2016 03 14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN
Grace Hession David, Counsel for the Attorney General of Ontario
- and -
BRYAN JAMES HUNKING
Jeffrey V. Milligan, Counsel for Bryan James Hunking
REASONS FOR JUDGMENT ON GARDINER HEARING
BLOOM J.
I INTRODUCTION
[1] The accused, Bryan Hunking, pleaded guilty to a single count of fraud over $5,000 following which I made a finding of guilt against him. Pursuant to s. 724(3)(e) of the Criminal Code and the decision of the Supreme Court of Canada in R. v. Gardiner, 1982 30 (SCC), [1982] 2 S.C.R. 368 a “Gardiner Hearing” was then held. The sole issue is whether the Crown has proven beyond a reasonable doubt that Mr. Hunking was the directing and controlling mind of the fraud on the investors subject of the finding of guilt.
[2] Both parties have submitted that, in analyzing the evidence adduced at the hearing for the purpose of deciding whether Mr. Hunking was the directing and controlling mind of the fraud, I should employ the following five criteria : (1) consider whether he had controlled corporate policy and procedure for the relevant business entities; (2) consider whether he had the final say on management decisions; (3) consider whether in the minds of the investors and the general public he had the most visible position in the organizational structure of the relevant business entities; (4) consider whether he held the most senior official positions in the relevant business entities according to public governmental business and corporate filings for the period subject of the prosecution; and (5) consider whether he had decision-making authority over the flow of the funds subject of the fraud. The parties also agree that other matters are germane to my analysis, including the timeline of relevant events.
[3] Accordingly, the five criteria are not the sole basis on which I have made my decision, but they are helpful in organizing the evidence, all which I have considered. I have also had regard to other matters. Further, I have been guided by a number of legal principles which I will set out in these reasons.
[4] To structure my reasons I have adopted the following framework: (1) a recitation of the agreed facts; (2) a statement of the applicable legal principles; (3) my analysis of the facts in which inter alia I employ those principles and the 5 criteria outlined above. I make that analysis in the context of the positions of the parties which I will describe; and (4) my conclusion.
II AGREED FACTS
[5] The parties agreed at the outset of the proceeding on many facts. Their dispute was in respect of the issue at the Gardiner hearing. These positions are reflected in exhibits 1A, 1B, and 1C. Exhibits 1A and 1B are respectively a version of the Agreed Facts filed by the defense and a version filed by the Crown in which the only differences are italicized passages; the selection of the final wording of these passages will depend on my findings on the Gardiner hearing. Exhibit 1C is an amendment to the Agreed Facts on which there is no dispute.
[6] The following paragraphs are relevant to the issue before me and common to exhibits 1A and 1B:
In early 2000, Bryan Hunking, met Inderpal Singh Bajaj at a Global Prosperity meeting …. Global Prosperity was a multi-level marketing system …, which originated in the United States. Bajaj then introduced his brother, Ajindrapal Singh, … to the Global Prosperity system and to Mr. Hunking. Mr. Hunking was then introduced to a friend of Mr. Singh and Mr. Bajaj, Rajesh Chowdhry, who was employed as a financial consultant at Investor’s Group. The four decided to commit to a Global Prosperity style “project”. Mr. Chowdhry brought to the project the concept of an e-commerce business that would provide Ayurvedic medical consultations and related medicines over the internet. Mr. Hunking told the three that he had access to a wide net of potential investors and the four agreed that there was a large group of Canadians attending Global Prosperity conferences that would be attracted to a Canadian vehicle to invest into the global market. Netbusmodel Inc. (“Netbusmodel”), was incorporated federally on March 28, 2000. The directors of this corporation were listed as Brian Hinking [sic]; Inderpal Singh Bajaj; Sunila Chowdhry [wife of Rajesh Chowdhry] and Gurdeep Kaur Narula [wife of Ajinderpal Singh “Baj”].
Hunking, Singh, Bajaj and Chowdhry all had equal voting shares in Netbusmodel Inc. … Over the next few months, the four partners discussed the nature of their newly formed corporation. Mr. Chowdhry organized the structure of the corporation’s investment model with Aird & Berliss LLP. Netbusmodel was formed to solicit funds
[The Netbusmodel Investment Scheme involved the following companies: Netbusmodel Inc.; Alcorp Financial Services Inc.; Baby Alcorp (1482042 Ontario Inc.) and the Help for Humanity Charity.]
Netbusmodel was … structured so that it could receive RRSP transfers of money from investors. … Alcorp Financial Services Inc… originally incorporated by Hunking in 1988 but long dormant, was now revived and used to receive non-RRSP money from investors in the same investment scheme. Mr. Hunking was registered as the President, Secretary and Treasurer of Alcorp. … 1482042 Ontario Inc. , was also incorporated to receive investor funds and was known as “Baby Alcorp” by the four directors.
Under Mr. Hunking’s oversight, Netbusmodel published and distributed material to actively solicit investors. In those materials, Mr. Hunking presented himself as an experienced and senior businessman with a history of integrity backed up by financial knowledge. In fact, Hunking’s background was “primarily that of a mortgage broker.…” Hunking could not boast of successful career in investments. … Hunking filed for bankruptcy in 1992 and, while fully discharged at the material time, never disclosed this fact to the investors in Netbusmodel even though it was material and relevant.
Similarly, the other three partners were described as experienced and senior businessmen. Mr. Bajaj was touted as experienced in the raising of capital internationally, and the movement of money internationally. Mr. Singh was promoted as a successful international businessman, insurance broker and financial planner. Mr. Chowdhry was advertised as a well-educated, creative, influential international businessman who, in Canada, worked as a financial planner for Investor’s Group and who managed a large book of investments of $14 Million in value. …
By the summer of 2000 Mr. Hunking and his partners began to actively solicit funds from investors to support the Netbusmodel investment opportunity. At that time, Mr. Hunking was holding seminars respecting Global Prosperity at a Perkins restaurant located at the Holiday Inn at Dixie Road and Highway 401. It was here that the first information sessions respecting Netbusmodel were hosted by Hunking and his three partners. Starting in late 2001, Mr. Hunking with the assistance of Mr. Chowdhry, also attracted investors by offering investment education seminars, called “Overviews”, through his company Greenfield & Associates Ltd. Four investment educational workshops were also offered to those who had already invested in Netbusmodel. … At the Perkins restaurant meetings, Mr. Hunking introduced his three partners as “the rest of the brain trust” and he explained that they were especially suited to craft the investment offshore because of their education and background. Mrs. Hunking was in attendance at many of these meetings, but at those times was never introduced. …
During the Overview seminars, Mr. Hunking told the investors that he and his team had devised a method of ensuring that they could make better returns than were normally possible through traditional means of financial investing. Netbusmodel[(Reference to Netbusmodel hereinafter refers to Netbusmodel/Alcorp/Baby Alcorp. )] was offered as a private Canadian corporation aimed at doing business globally, and a corporation that focused on wealth creation and wealth protection. Mr. Hunking described the investment opportunity saying that it was safe, secure, and legal. … Attendees were also to attend the four workshops which were geared to providing financial education, and to solicit investors for Netbusmodel. …
[Prospective investors] learned of the distribution of funds during the workshops conducted by both Mr. Hunking and Mr. Chowdhry. During these times, it was explained to the Netbusmodel investors that while 70 to 80 % of their investment money was to be devoted to a safe offshore investment, the remaining 20 to 30% would be used to fund the internet start-up companies in Canada.
The internet start-up companies were described as risky, such that they might lose all the money invested in them, but Mr. Hunking and Mr. Chowdhry were hopeful that they had excellent prospects for future returns. In respect of the 70 to 80% of the invested funds, it was indicated to investors that the returns would be generated by means of investments in an offshore vehicle, and that this offshore investment was a method of legally avoiding taxes. At these times, Mr. Hunking also mirrored the guaranteed rates expounded by Mr. Chowdhry, namely that the offshore investment option would produce returns in the range of 20 to 30% per annum.
During one of the four workshops, the offshore idea was described to the investors by Mr. Hunking and Mr. Chowdhry as the “Indian Call Money Market”. Investors were told that the primary idea was that banks in India were looking to make short-term, high interest loans and in order to acquire the funds to make the loans, the banks would pay 20 to 30% returns. Investors were told that if they pooled their funds, they could capitalize on this high interest rate in order to generate the guaranteed returns.
In respect of the remaining 20 to 30% of funds invested, investors were told about “Magic of Ayurveda” which was an Ayurvedic website that was being developed to match worldwide patients with practitioners of Ayurvedic medicine in India so that holistic medicines and alternative medical treatment could be prescribed. …
Netbusmodel purchased the technology for the Magic of Ayurveda from an entity called Birchwood Management Inc., in the Turks and Caicos, who had purchased it from AS Webcom in India for around $10,000 from each partner, so $40,000 in total. Birchwood was controlled by the four business partners and together they assigned a value to Magic of Ayurveda of $5M and so they sold Magic of Ayurveda to Netbusmodel through Birchwood for $5M. Investors were never told of this fact.
Investors were told that Netbusmodel was also developing “Adjendi” which was an automotive software technology product that facilitated the tracking of customers and the provision of excellent customer service in the automotive industry.
Singh and Bajaj had little or no contact with investors other than being introduced at the Overview seminars.
Mr. Hunking … ought to have known that, in view of the conflict of interest as the result of assigning a $5M value to Magic of Ayurveda and the sale of this interest to Netbusmodel by Birchwood, he would not be able to ever invest even close to 70 to 80% of investors’ funds into the Indian Call Money Market.
By December 2000, interest from investors was such that a corporate office was sought and in late November or early December, Netbusmodel opened corporate offices at 311 Matheson Blvd. in Mississauga to conduct the business of the company and to house the operations associated with the internet start-up companies.
Funds were solicited from investors from June 2000 through to, and including, the end of March 2003. No overviews or workshops were conducted after September 2002 but Mr. Chowdhry continued to raise funds until the end of March 2003.
[N]one of the money that was contributed by investors was ever invested offshore….
During the material time, investors were also told by Mr. Chowdhry that they could also donate and invest in a charity called: Help for Humanity (Canada/International). These “charities” were explained as providing funds to assist people around the world as well as seniors at home in Canada. Mr. Chowdhry told investors that part of the money would go to the charity and part of it would be invested. Anyone who contributed to Help for Humanity was told that a charitable tax benefit could be claimed on their income tax at year end for the entire amount of their investment. The funds that were contributed towards Help for Humanity were then loaned to a retirement home, Emmanuel Village Homes (Kitchener) Inc., which was a separate business investment jointly owned by Mr. Hunking, Mr. Chowdhry, Mr. Bajaj and Mr. Singh.
Mr. Hunking, Mr. Singh and Mr. Chowdhry all signed as the trustees of the charity… .
In October 2001, Messrs. Hunking, Chowdhry, Bajaj and Singh each acquired an interest in Emmanuel Village Homes (Kitchener) Inc., (“EVH”), a retirement complex in Kitchener, Ontario. The four partners acted under a numbered company for this business transaction – 1488583 Ontario Inc. The four partners bought EVH, for a purchase price of $1 and assumed a pre-existing registered, secured $1.849M CDN liability in connection with the home as well as an unsecured $741,000 CDN liability. On November 8, 2001, EVH through its previous principals, granted a $500,000 mortgage to 1488583 Ontario Inc. The $500,000 amount was to cover funds being advanced by the partners into the project. The mortgage was registered on November 8, 2001 and discharged on November 2, 2007. …
In the fall of 2002, Mr. Hunking petitioned his Netbusmodel/Alcorp investors with a special offer to directly loan money to a retirement home. He provided investors with a flier that noted the terms of the short term loan. Investors were offered varying interest rates ranging from 14% to 18% depending on the time limits of the loan. … All cheques were to be made payable to “Commonwealth Capital Corporation” and funds had to be received at the 311 Matheson Blvd. offices by the deadline date of September 30, 2002. Mr. Hunking described the offer thusly:
This is your opportunity to earn an attractive rate of interest in a short period of time. All funds are secured by the Retirement Home.
In business these opportunities come about from time to time and are taken up by private investors very quickly because of their short term nature and secured position. We wish to afford you, and if you wish to share this with your friends, the opportunity to participate and as you can see the window of this opportunity is very short. Act Now!!!
Regards,
Bryan Hunking
The Netbusmodel/Alcorp investors who decided to accept this offer were provided with a Commonwealth Capital Corporation or Netbusmodel investment certificate and promissory note that clearly noted the period of the loan, the amount loaned, the rate of interest guaranteed and the date of maturity of the loan… Aside from the one investor, none of the investors who accepted this offer ever saw the return of their principal. …
On December 3, 2002 the partners transferred the land from EVH to an entity called Emmanuel Village Residence Inc.(“EVR”). Also on December 3, 2002 the four partners guaranteed a mortgage against EVR and began the construction of a high rise addition to the retirement facility. The mortgage was granted in favour of a high rise addition to the retirement facility. The mortgage was granted in favour of Romspen Investments Corporation [“Romspen”], and was in the amount of $7.5M CDN. Thus at that time, the four partners assumed a $9M CDN liability in connection with the EVH complex.
On March 17, 2003 Mr. Hunking became the sole shareholder of the Emmanuel Village Homes complex by virtue of a numbered company, 1459649 Ontario Ltd. [The Emmanuel Village Homes complex refers to EVH, EVR, and a holding company called Emmanuel Village Management Inc.] … A review of the relevant accounts in this matter has revealed that investor money [totalling $4,011,823] was improperly moved … into the Emmanuel Village Homes [complex project] … without the consent or knowledge of the investors. …
With respect to the purchase agreement as sole shareholder, Hunking agreed to a schedule of payment that had a closing date of March 5, 2003, though that payment schedule was acknowledged as fluid and subject to change by both Mr. Hunking and Mr. Chowdhry. The purchase price totalled $4M consisting of $1 CDN for EVH, and an acknowledgement of debt from [Commonwealth Capital Corporation]… to each of the four partners equally. Mr. Hunking and the three other partners signed off on the agreement on March 14, 2003. …
By July of 2003 investors began to learn that none of their money had ever been invested off-shore in an investment vehicle with an 18 to 30% annual return. Investors were sent a letter by Mr. Hunking on July 9, 2003 which acknowledged a tough market for emerging technologies. The tone of the letter was apologetic yet hopeful. The letter ended with a renewed promise of continued development and commitment to the start-up companies. No mention was made whatsoever of the EVH acquisition which occurred in March of 2003 by means of investor money or the closing of the Netbusmodel offices in April of that same year.
From 2003 to 2004, some persistent investors were able to speak or meet with Mr. Hunking personally to ask about their investments. Some expressed concerns about their inability to contact Mr. Chowdhry to discuss their investments with him at Investor’s Group and their tax preparation of which Mr. Hunking had no knowledge. Mr. Hunking told investors that since the tragedy of September 11, 2001, it was very difficult to bring funds back to the mainland from overseas investing, however he assured them that everything would be okay and spoke of their “investment” even though there never was an investment. Mr. Hunking told other investors who lent money to Commonwealth Capital Corporation that he was having trouble “refinancing” the construction loan conversion to take out a mortgage of EVH, due to the certificate of pending litigation placed on the property by Messrs. Chowdhry, Singh and Bajaj and asked for their patience.
On April 9, 2004 Bryan Hunking removed himself as a director of Netbusmodel but failed to notify the majority of the investors of this development. However, he did notify the other three directors of Netbusmodel as well as a few key shareholders….
[I]nvestigation into the matter has revealed that Mr. Hunking and Mr. Chowdhry solicited a total of $5.2M CDN from a total of 29 investors in this matter.
With respect to the “safe off-shore investment”, the investor complainants’ money was not invested as it had been promised. $4M CDN of investor money was funnelled into the Emmanuel Village retirement complex.
III APPLICABLE LEGAL PRINCIPLES
A. The Gardiner Hearing
[7] S. 724(3) of the Criminal Code provides:
Disputed facts
(3) Where there is a dispute with respect to any fact that is relevant to the determination of a sentence,
o (a) the court shall request that evidence be adduced as to the existence of the fact unless the court is satisfied that sufficient evidence was adduced at the trial;
o (b) the party wishing to rely on a relevant fact, including a fact contained in a presentence report, has the burden of proving it;
o (c) either party may cross-examine any witness called by the other party;
o (d) subject to paragraph (e), the court must be satisfied on a balance of probabilities of the existence of the disputed fact before relying on it in determining the sentence; and
o (e) the prosecutor must establish, by proof beyond a reasonable doubt, the existence of any aggravating fact or any previous conviction by the offender.
[8] In considering the same point addressed by paragraph (e) of that provision Justice Dickson for the majority of the Supreme Court of Canada stated the following at page 414-415 of R v. Gardiner, 1982 30 (SCC), [1982] 2 S.C.R. 368:
It should also be recalled that a plea of guilty, in itself, carries with it an admission of the essential legal ingredients of the offence admitted by the plea, and no more. Beyond that any facts relied upon by the Crown in aggravation must be established by the Crown. If undisputed, the procedure can be very informal. If the facts are contested the issue should be resolved by ordinary legal principles governing criminal proceedings including resolving relevant doubt in favour of the offender.
In my view, both the informality of the sentencing procedure as to the admissibility of evidence and the wide discretion given to the trial judge in imposing sentence are factors militating in favour of the retention of the criminal standard of proof beyond a reasonable doubt at sentencing.
B. The Elements of Fraud
[9] In R. v. Theroux, 1993 134 (SCC), [1993] 2 S.C.R. 5 Justice McLachlin, as she then was, discussed the elements of fraud at pages 15 to 20:
Since the mens rea of an offence is related to its actus reus, it is helpful to begin the analysis by considering the actus reus of the offence of fraud. Speaking of the actus reus of this offence, Dickson J. (as he then was) set out the following principles in Olan:
(i) the offence has two elements: dishonest act and deprivation;
(ii) the dishonest act is established by proof of deceit, falsehood or "other fraudulent means";
(iii) the element of deprivation is established by proof of detriment, prejudice, or risk of prejudice to the economic interests of the victim, caused by the dishonest act.
Just as what constitutes a lie or a deceitful act for the purpose of the actus reus is judged on the objective facts, so the "other fraudulent means" in the third category is determined objectively, by reference to what a reasonable person would consider to be a dishonest act. Second, Olan made it clear that economic loss was not essential to the offence; the imperilling of an economic interest is sufficient even though no actual loss has been suffered
In a number of subsequent cases, courts have defined the sort of conduct which may fall under this third category of other fraudulent means to include the use of corporate funds for personal purposes, non‑disclosure of important facts, exploiting the weakness of another, unauthorized diversion of funds, and unauthorized arrogation of funds or property
As noted above, where it is alleged that the actus reus of a particular fraud is "other fraudulent means", the existence of such means will be determined by what reasonable people consider to be dishonest dealing. In instances of fraud by deceit or falsehood, it will not be necessary to undertake such an inquiry; all that need be determined is whether the accused, as a matter of fact, represented that a situation was of a certain character, when, in reality, it was not.
Having ventured these general comments on mens rea, I return to the offence of fraud. The prohibited act is deceit, falsehood, or some other dishonest act. The prohibited consequence is depriving another of what is or should be his, which may, as we have seen, consist in merely placing another's property at risk. The mens rea would then consist in the subjective awareness that one was undertaking a prohibited act (the deceit, falsehood or other dishonest act) which could cause deprivation in the sense of depriving another of property or putting that property at risk. If this is shown, the crime is complete. The fact that the accused may have hoped the deprivation would not take place, or may have felt there was nothing wrong with what he or she was doing, provides no defence.
the mens rea of fraud is established by proof of:
subjective knowledge of the prohibited act; and
subjective knowledge that the prohibited act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim's pecuniary interests are put at risk).
Where the conduct and knowledge required by these definitions are established, the accused is guilty whether he actually intended the prohibited consequence or was reckless as to whether it would occur.
The inclusion of risk of deprivation in the concept of deprivation in Olan requires specific comment. The accused must have subjective awareness, at the very least, that his or her conduct will put the property or economic expectations of others at risk. As noted above, this does not mean that the Crown must provide the trier of fact with a mental snapshot proving exactly what was in the accused's mind at the moment the dishonest act was committed. In certain cases, the inference of subjective knowledge of the risk may be drawn from the facts as the accused believed them to be. The accused may introduce evidence negating that inference, such as evidence that his deceit was part of an innocent prank, or evidence of circumstances which led him to believe that no one would act on his lie or deceitful or dishonest act. But in cases like the present one, where the accused tells a lie knowing others will act on it and thereby puts their property at risk, the inference of subjective knowledge that the property of another would be put at risk is clear.
C. The Principles Governing Piercing the Corporate Veil and the Determination of the Directing and Controlling Mind of a Corporation
[10] The law has imposed liability on individuals for the acts of corporations and manifestly has imposed liability on corporations for the acts of individuals. Principles have emerged from this jurisprudence which I summarize below.
[11] In 642947 Ontario Ltd. v Fleischer, 2001 8623 (Ont CA) at paragraphs 67 to 68 Justice Laskin for the Ontario Court of Appeal stated:
To pierce the corporate veil is to disregard the separate legal personality of a corporation, a fundamental principle of corporate law recognized in Salomon v. Salomon & Co., [1897] A.C. 22, [1895-9] All E.R. Rep. 33. Only exceptional cases -- cases where applying the Salomon principle would be "flagrantly" unjust -- warrant going behind the company and imposing personal liability.
Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated "those in control expressly direct a wrongful thing to be done": Clarkson Co. v. Zhelka at p. 578. Sharpe J. set out a useful statement of the guiding principle in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 at pp. 433-34 (Gen. Div.), affd [1997] O.J. No. 3754 (C.A.): "the courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct."
[12] In R. v. Canadian Dredge & Dock Co., 1985 32 (SCC), [1985] 1 S.C.R. 662 Justice Estey for the Court discussed the imposition of criminal liability on a corporation for a mens rea offense based on the identification theory according to which the mens rea of the directing mind of the company is attributed to it. A useful discussion of the application of similar principles is cited by Justice Estey in the following passage at paragraph 15 of his reasons:
See also Halsbury’s (3rd ed.), vol. 9, p. 90, paragaph 183. By the time the fourth edition appeared in 1974 the law had changed a little more. The learned authors of this edition had this to say (vol. 11, p. 30, paragraph 34):
- Corporations. In general, a corporation is in the same position in relation to criminal liability as a natural person and may be convicted of common law and statutory offences including those requiring mens rea. There are, however, crimes which a corporation is incapable of committing or of which a corporation cannot be found guilty as a principal....
Criminal liability of a corporation arises where an offence is committed in the course of the corporation's business by a person in control of its affairs to such a degree that it may fairly be said to think and act through him so that his actions and intent are the actions and intent of the corporation. It is not enough that the person whose conduct it is sought to impute to the corporation is a manager or responsible agent or high executive; whether persons are the “directing mind and will" of a corporation, so that their conduct in its affairs becomes the conduct of the corporation, must depend on all the circumstances.
D. The Principles Governing a Vetrovic Warning
[13] In considering the evidence of Singh, Bajaj, and Chowdhry I must decide whether I must caution myself in accordance with the principles of a Vetrovic warning. In R.v. Kanagalingam, 2014 ONCA 727 Justice Blair for the Court at paragraphs 50 to 54 set out those principles:
[50] The former co-accused (now witnesses) who testified against the appellant had compelling motives to lie about his involvement, both in their agreed statements of fact and in their other pre-trial statements: they – and in the case of Mr. Indrakumaran, his family and a friend – stood to benefit handsomely from their guilty pleas. Many charges were withdrawn (including, in Mr. Vijayakumar’s case, the serious charge of participating in a criminal organization). The sentences received were, on balance, quiet lenient. Mr. Indrakumaran, his family, and a friend, dodged the loss of $105,000 to bail estreatment.
[51] None of this was brought home to the jury in the context of the Vetrovec warning.
[52] The purpose of a Vetrovec warning is “to alert the jury to the danger of relying on the unsupported evidence of unsavoury witnesses and to explain the reasons for special scrutiny of their testimony”: R. v. Khela, 2009 SCC 4, [2009] 1 S.C.R. 104, at para. 11.
[53] It is well settled that a trial judge has a considerable amount of discretion in crafting a Vetrovec caution to fit the circumstances, and that no particular language is mandatory for that purpose. Appellate intervention is not warranted “unless a cautionary instruction should have been given but was not, or the cautionary instruction that was given failed to serve its intended purpose”: Khela, at para. 13. Nonetheless, the courts have developed “a principled framework” to assist judges in constructing warnings appropriate to the circumstances. As articulated by this Court in R. v. Sauvé (2004), 2004 9054 (ON CA), 182 C.C.C. (3d) 321, leave to appeal to S.C.C. refused, [2005] 1 S.C.R. xv, at para. 82, and confirmed by the Supreme Court in Khela, at para. 37, the “four main foundation elements” of such a caution require the trial judge, at a minimum, to:
a) identify to the jury the witnesses whose evidence requires special scrutiny;
b) explain the reasons why the evidence is subject to special scrutiny;
c) caution the jurors about the dangers of convicting the accused on the unconfirmed evidence of the witness, although they are entitled to do so if they believe that the evidence of the witness is true; and
d) advise the jurors that, in determining whether the suspect evidence is true, they should look for independent evidence tending to confirm that the untrustworthy witness is telling the truth as to the guilt of the accused.
[54] In his careful submissions, Mr. Smith outlined a number of errors that he said resulted in the Vetrovec warning failing to fulfill its intended purpose here. In my view, it is only necessary to deal with one of them. I am persuaded by his first submission, namely, that the trial judge did not adequately explain the reasons why the testimony of the four formerly co-accused witnesses required special scrutiny, and that a new trial is therefore required.
E. Evidentiary Principles Regarding a Determination of the Authenticity and Probative Value of a Document Alleged to have been Authored by the Accused
[14] In the case at bar I must determine the evidentiary value of a document which the Crown contends is a copy of a napkin on which the accused drew an illustration of the flow of funds subject of the fraud. In making that determination I am guided by two different sets of legal principles.
[15] First, the following rules discussed by Justice Trotter of this court in R. v. Andalib-Goortani, 2014 ONSC 4690 at para.28 apply to determining the authenticity of the document:
[28] The leading Canadian case on authenticating images is R. v. Creemer and Cormier, 1967 711 (NS CA), [1968] 1 C.C.C. 14 (N.S.S.C. App. Div.). McKinnon J.A. noted the following requirements for authentication at p. 22:
All the cases dealing with the admissibility of photographs go to show that such admissibility depends upon (1) their accuracy in truly representing the facts; (2) their fairness and absence of any intention to mislead; and (3) their verification on oath by a person capable of doing so.
[16] In R. v. Evans, 1993 86 (SCC), [1993] 3 S.C.R. 653 at pages 668 to 669 Justice Sopinka for the majority of the Supreme Court of Canada set out the following principles applicable specifically to admissions by an accused, such as admissions the copy of the napkin may constitute:
In my opinion, this is the correct approach to be applied in respect of the authenticity of admissions. If there is some evidence to permit the issue to be submitted to the trier of fact, the matter must be considered in two stages. First, a preliminary determination must be made as to whether, on the basis of evidence admissible against the accused, the Crown has established on a balance of probabilities that the statement is that of the accused. If this threshold is met, the trier of fact should then consider the contents of the statement along with other evidence to determine the issue of innocence or guilt. … in the second stage the contents are evidence of the truth of the assertions contained therein.
F. The Principles Governing Handwriting Comparisons by the Trier of Fact
[17] In a series of cases the Ontario Court of Appeal has affirmed that a trial judge as trier of fact may make handwriting comparisons between a known or admitted sample of handwriting and another document bearing handwriting, and find that both were written by the accused. However, the court has conditioned the use of this power on the trial judge’s self-instruction on the dangers in exercising it. These cases include R. v. Abdi (1997), 1997 4448 (ON CA), 34 O.R. (3d) 499; 1997 4448 (Ont. C.A.), R. v. Malvoisin, 2006 33304 (Ont.C.A.), and R.v. Flynn, 2010 ONCA 424.
[18] In Abdi, 1997 4448 Justice Robins for the Court stated:
In the appellant's submission, s.8 of the Canada Evidence Act ("the Act") requires that evidence with respect to the comparison of handwriting be given by experts or witnesses with particular knowledge of the writings of the accused. To allow the jury to compare handwritten documents without witness testimony as to the validity of the comparison, the appellant argues, is to turn the jurors into witnesses and deprive the accused of the right of cross-examination. As I noted earlier, the handwriting in the red address book is the appellant's.
Section 8 of the [Canada Evidence] Act provides:
- Comparison of a disputed writing with any writing proved to the satisfaction of the court to be genuine shall be permitted to be made by witnesses, and such writings, and the evidence of witnesses respecting those writings, may be submitted to the court and jury as proof of the genuineness or otherwise of the writing in dispute.
Under s. 8, handwriting may be proved by comparison, done by expert or lay witnesses, of the disputed writing with a writing that has been proved to be genuine and which has been admitted into evidence for the purpose of comparison. The question is whether or not, in light of this provision, the trier of fact is entitled to compare the disputed handwriting with the admitted or proved handwriting and form an opinion thereon in the absence of any witness testimony as to the genuineness or otherwise of the disputed writing. Put another way, does s. 8 provide the only means for comparison of handwritten documents and thus preclude comparison by the trier of fact without witness evidence? If the trier of fact does not require such assistance, then the question is what caution need be given as to the dangers of engaging in an unaided comparison.
In R. v. Dixon, supra, the Nova Scotia Supreme Court, Appellate Division, held that the statutory provision allowed the comparison to be made by expert or lay witnesses "or without the intervention of any witnesses at all, by the jury themselves, or, in the event of there being no jury, by the court".
I agree with the conclusions reached in Dixon. In my opinion, the common law rule has not been ousted by s. 8 of the Act. This section does not preclude a trier of fact from comparing disputed handwriting with admitted or proved handwriting in documents which are properly in evidence, and drawing inferences therefrom. In these circumstances, a trier of fact may make the comparison in the absence of witness testimony as to the genuineness or otherwise of the disputed writing.
There is, of course, a potential danger in making unassisted comparisons and the judge's charge should reflect this danger. The jury should be reminded that it has no expert or other evidence relating to the writings and directed as to the care to be exercised in making the comparison. Any difficulties that a comparison may reasonably present in the light of the circumstances of a given case should be brought to the jury's attention. As well, the jury may require instruction on the quality of the handwriting exemplar, whether it is of sufficient length and clarity for comparison purposes and, depending on the nature of the facts and the charge, on other matters going to the weight that may be placed upon such a comparison. In cases where forgery or the like is alleged, expert evidence may well be essential.
[19] The matters on which a jury must be cautioned are the same as those on which a trial judge is to caution himself or herself as trier of fact.
G. The Burden of Proof Where Credibility Is In Issue
[20] In cases where credibility is in issue the Supreme Court of Canada and Ontario Court of Appeal have defined the principles respecting which a trial judge must instruct himself or herself as regards the burden of proof. In R .v. B.D., 2011 ONCA 51, [2011] O.J. No. 198; 2011 ONCA 51 Justice Blair for the Ontario Court of Appeal
helpfully discussed those principles:
102 In R. v. W.(D.), Cory J. outlined what has now become the classic jury instruction with respect to reasonable doubt in cases. Although familiar, it bears repeating (at pp. 757-58);
In a case where credibility is important, the trial judge must instruct the jury that the rule of reasonable doubt applies to that issue. The trial judge should instruct the jury that they need not firmly believe or disbelieve any witness or set of witnesses. Specifically, the trial judge is required to instruct the jury that they must acquit the accused in two situations. First, if they believe the accused. Second, if they do not believe the accused's evidence but still have a reasonable doubt as to his guilt after considering the accused's evidence in the context of the evidence as a whole. ...
Ideally, appropriate instructions on the issue of credibility should be given, not only during the main charge, but on any recharge. A trial judge might well instruct the jury on the question of credibility along these lines:
• First, if you believe the evidence of the accused, obviously you must acquit.
• Second, if you do not believe the testimony of the accused but you are left in reasonable doubt by it, you must acquit.
• Third, even if you are not left in doubt by the evidence of the accused, you must ask yourself whether, on the basis of the evidence which you do accept, you are convinced beyond a reasonable doubt by that evidence of the guilt of the accused. [Citations omitted.] [Emphasis in original.]
103 W.(D.) itself, and subsequent authorities, make it clear, however, that W.(D.) does not set out a slavish formula; what is important is that the jury understand the burden and standard of proof and their application. As Cory J. said in W.(D.), at p. 758 :
[T]he failure to use such language is not fatal if the charge, when read as a whole, makes it clear that the jury could not have been under any misapprehension as to the correct burden and standard of proof to apply.
104 In R. v. S.(W.D.), 1994 76 (SCC), [1994] 3 S.C.R. 521, Cory J. reiterated this caveat, emphasizing, at p. 533 that the W.(D.) procedure was not meant to be followed "word for word as some magic incantation". As Abella J. said in R. v. C.L.Y., 2008 SCC 2, [2008] 1 S.C.R. 5, at para. 7, "the key is whether the correct burden and standard of proof were applied, not what words were used in applying them." This principle has been repeated in other subsequent authorities: see, for example, R. v. Do (2003), 2003 24750 (ON CA), 175 C.C.C. (3d) 176 (Ont. C.A.) and R. v. Edgar (2010), 2010 ONCA 529, 101 O.R. (3d) 161 (C.A.), at para. 85.
105 There is some uncertainty in the jurisprudence, however, about whether the W.(D.) requirement extends beyond cases where the accused testifies to those where the accused does not but there is other defence evidence called contradicting the Crown's case and/or conflicting evidence favourable to the defence in the Crown's case (for example, an exculpatory remark in a statement put in by the Crown), and the jury must make credibility findings in that context. This Court has not yet squarely decided that issue. For the reasons that follow, I am satisfied that the principles underlying W.(D.) do extend to such circumstances.
114 What I take from a review of all of these authorities is that the principles underlying W.(D.) are not confined merely to cases where an accused testifies and his or her evidence conflicts with that of Crown witnesses. They have a broader sweep. Where, on a vital issue, there are credibility findings to be made between conflicting evidence called by the defence or arising out of evidence favourable to the defence in the Crown's case, the trial judge must relate the concept of reasonable doubt to those credibility findings. The trial judge must do so in a way that makes it clear to the jurors that it is not necessary for them to believe the defence evidence on that vital issue; rather, it is sufficient if - viewed in the context of all of the evidence - the conflicting evidence leaves them in a state of reasonable doubt as to the accused's guilt: Challice. In that event, they must acquit.
IV ANALYSIS
A. The Essence of the Fraud and the Issue at the Gardiner Hearing
[21] Although it was not the entirety of the fraud, the essence of it was the misrepresentation to investors that 70 % to 80% of their invested funds would go into a safe offshore investment, while in fact 4 million dollars of investors monies went into the Emmanuel Village Homes retirement complex. The dishonest act, deprivation, and the subjective knowledge of the prohibited act and potential consequence required by Justice McLachlin’s reasoning in Theroux, supra were clearly present on the part of the accused.
[22] Therefore, the question of whether the accused was the directing and controlling mind of the fraud must focus on his role in the misrepresentation and the diversion of the investment monies. That issue is one of fact; for that reason I do not find useful the principles of law relating to piercing the corporate veil or the imposition of criminal liability based on the identification theory, although I have considered the application of those principles.
B. The Role of the Accused in Bringing Forward the Emmanuel Village Homes Investment
[23] Robert Seip was a witness called by the Crown. His credibility was not attacked by the Defense and I accept his evidence; I will set out the material facts emerging from that evidence in the remainder of this part B. of my analysis. He had formed a business called Seip & Associates which inter alia evaluated proposals for retirement homes and oversaw their construction.
[24] A lawyer had referred the accused to Mr. Seip. Seip and the accused met in the fall of 2000 at a Tim Horton’s restaurant in Kitchener to discuss a project in Kitchener. That project was Emmanuel Village Homes which consisted of townhomes and a proposed apartment which later was modified to a retirement home. The accused told Seip that he was trying to assist his father who was on the board of directors of the development, and that he wanted Seip’s services for that purpose. At a later meeting between the accused and Seip at the same restaurant, the accused stated that he wanted Seip, rather than himself, to do the day to day development of the project. Ultimately the accused agreed to give Seip a short term contract, starting in January 2001 and ending September 30, 2001 at a fee of $4000.00 per month.
[25] Mr. Seip gave a presentation to the board of Emmanuel Village between the end of 2000 and October of 2001. The accused’s father, Willis Hunking, was on the board. In February 2002 after several further meetings, Seip was given a long term contract to do design, building, marketing, and leasing.
[26] The accused and Seip discussed the funding of the project before the contract was signed. Seip told the accused that he needed at least 5 million dollars because the project would cost approximately 13 million dollars. The accused told him that 6 million dollars was available.
[27] Seip asked the accused for financial statements. Later Seip met with the accused, Singh, Bajaj, and Chowdhry at the Netbusmodel offices. The meeting took place between September 2001 and the signing of the February 2002 long term contract. The accused and Chowdhry confirmed the existence of the 5 to 6 million dollars. Seip asked for financial statements to support the existence of the monies, but they were refused. The four individuals with whom he met, were presented to Seip as equal partners, but the accused was presented as the person with whom Seip would work and to whom he would report. Seip in fact took his instructions on the project from the accused.
[28] Seip was informed by both the accused and Chowdhry that the funds for the building of the project would come from the cash generated by their companies, although Seip on a few occasions was given to understand that monies were being sought or coming from other sources.
[29] Seip met many times with the accused regarding the project, but only the once with the four individuals. At that meeting in substance only the accused and Chowdhry spoke to Seip.
[30] Construction was finished at approximately the end of October 2004 and leasing began. The accused and a representative of Emmanuel Village began discussions with Seip to buy out his contract. In approximately December 2004 Seip received a letter from the accused terminating his services.
C. The Timing of the First Investment in Netbusmodel
[31] According to the agreed facts the solicitation of funds from investors for Netbusmodel started in June of 2000. The first cheque from an investor was that of Carol Exley dated September 21, 2000 and for $ 15,000.00.
[32] It is important to understand the timeline of events regarding both Emmanuel Village Homes and Netbusmodel. To summarize, the accused met Seip in the fall of 2000 when investor money started to flow into the Netbusmodel investment arrangement which included Netbusmodel, Alcorp, Baby Alcorp, and the Help for Humanity charity. Seip’s short term contract started in January of 2001. He did not even meet Singh, Bajaj, and Chowdhry until at earliest September of 2001. It is clear to me that the accused saw the investors’ monies as a way to fund the Emmanuel Village Homes project in respect of which he had a personal connection through his father.
D. The Recruitment of Investors and the Flow of the Funds
[33] The Defense conceded in oral argument that the evidence of the investors established that the accused took the leading role in soliciting funds from the investors at the meetings with potential investors and investors, including the workshops and overviews, and in making misrepresentations to them as to how their money was to be invested.
[34] The Crown alleged that an important element of the evidence establishing that the accused was the directing and controlling mind of the fraud was the presence of his signature, initials, and written endorsements on certain cheques. The Crown also asked me in that regard to make my own identification of the accused’s handwriting by reference to what it contended were known samples. The Crown argued, however, in its oral reply submissions that the proof of the handwriting in the signatures, initials, and endorsements was not necessary to the Crown’s case if I made the finding that the accused directed that the monies go into the accounts to which they went; the proof of the handwriting was simply evidence of that direction contended the Crown.
[35] The Defense does not allege the large scale forgery of the accused’s handwriting for the purpose of directing cheques to accounts to which the accused would not have intended that they be deposited; moreover, there was no evidence of even one such forgery. The Defense concedes that the monies generally went where the accused intended in pursuance of the fraud; and simply asserts that he was not proven to be the directing mind of the fraud, merely a party to it bearing no more culpability than Singh, Bajaj, or Chowdhry. The Defense argues, however, that it cannot be inferred in respect of these signatures, initials, and endorsements relied upon by the Crown that they were written by the accused; and that, while the law permits me to identify the accused’s handwriting myself, I should exercise substantial caution in so doing in this case.
[36] I am mindful of my right to make the handwriting identifications requested by the Crown. However, I have regard to the difficulties presented by the circumstances of this case in making such identifications, as I am cautioned to do by the Court of Appeal in Abdi. Those difficulties include the fact that that the fraud was one in which Singh, Bajaj, and Chowdhry had a role, a point which I will discuss in more detail below. I am also troubled by the absence of any testimony from clerks or other employees who could give testimony, from the point of view of someone without direct economic interest, as to the internal workings of the complex web of accounts and companies and as to who normally wrote and signed documents. For those reasons I am not prepared to make my own identifications of the accused’s handwriting as requested by the Crown.
[37] I do, however, find that the documents which reflect the flow of funds, carried out the fraud as contemplated by the accused as conceded in substance by the Defense as noted above.
E. The Holding of Senior Corporate Positions
[38] The Crown contends that an important element of proof in establishing the accused’s role as the directing and controlling mind of the fraud was his holding of key corporate positions during the operation of the fraud. The Defense does not challenge this evidence; it argues rather that the Crown still has not discharged its onus on the Gardiner Hearing. Below in this section of my reasons I set out the undisputed facts regarding the accused’s holding of the corporate positions.
[39] Netbusmodel did its banking at the Canadian Imperial Bank of Commerce. When its account opened, the “Basic Business Account and Services Application-Customer Information” form listed the accused as the “Key Principal” of the company. The company’s general banking resolution dated June 28, 2000 identified the accused as the company’s “President.” The Certificate of Officers and Directors bearing the same date and also filed at the bank also described the accused as President.
[40] Alcorp Financial Services Ltd. was incorporated on September 27, 1988 and the accused according to records of the Ontario government was President at that time; these records, copies of which were tendered in evidence, showed no change in that office as of the date of the production of the copy of the records on October 10, 2013.
[41] The records of the Canadian Imperial Bank of Commerce, where Alcorp banked, described the accused as President and as the “Key Principal” of the company. A Certificate of Officers and Directors filed at the bank and dated September 12, 2000 also confirmed his status as President.
[42] Baby Alcorp, 1482042 Ontario Inc., was incorporated on June 20, 2001. As of June 24, 2002 a record of the Ontario government shows the accused as President. Another such record shows that he ceased to be President as of April 9, 2004.
[43] Commonwealth Capital Corporation was used to move investors’ money from the accounts of Netbusmodel, Alcorp, and Baby Alcorp, among others, into Emmanuel Village Homes. In multiple records of the Canadian Imperial Bank of Commerce at which it banked, the accused is shown as President in May of 2001; at least one of those records also identifies him as “Key Principal.”
[44] As of October 7, 2003 the accused was President of Greenfield and Associates Ltd. according to a record of the Ontario government.
[45] This evidence regarding the most senior positions in corporate entities which played important roles in the fraud, points significantly at the accused as the directing and controlling mind in the fraud.
F. Corporate Policy and Vision
[46] The purported vision and policy of Netbusmodel on the basis of which investors were attracted, involved offshore investment and “delinking” (purportedly avoidance of tax by severing the ownership link to the investments). This scheme was of very questionable legality and derived from the Global Prosperity notions to which the accused subscribed before the commencement of the fraud, and which notions he brought to Netbusmodel. That pre-fraud connection of the accused to this philosophy and his bringing it to the attention of Singh, Bajaj, and Chowdhry were not challenged by the Defense. The accused’s pre-fraud connection to the philosophy was supported by the testimony of Mark Wardley.
G. Responsibility for Management Decisions and Power to Bind the Corporation
[47] The role of the accused in management decisions taken in the execution of the fraud is demonstrated by three key examples.
[48] First, Frank McDonald had brought the business of Adjendi to Netbusmodel where he continued to work in that business. The accused became the President of Adjendi and ultimately terminated McDonald’s employment.
[49] Second, Robert Seip’s employment on the Emmanuel Village Homes project was terminated by the accused.
[50] Third, Tab 28 of Exhibit 1 is a letter of intent dated February 19, 2003 which provides some explanation of the transaction by which the accused ultimately acquired the Emmanuel Village Homes project by virtue of a numbered company on March 17, 2003. That document demonstrates the ubiquitous presence of the accused. He had given instructions to the lawyer who had drafted the letter; he signed as a seller; and he signed in trust for two companies to be incorporated as purchaser.
H. Public Visibility
[51] The accused was presented to the public as the President of Netbusmodel; his business card made that point as did a typical letter from him on company stationery found at tab 11 of exhibit # 1. Moreover, the Defense conceded in its written submissions that the understanding of investors was that “Hunking was the President, ‘principal’, or the ‘head’, or was in charge of ” the company.
I. The “Napkin”
[52] One of the investors, Amalia Picciottoli, identified exhibit 4, tab 36, as a copy of a napkin on which the accused had drawn a diagram of the flow of the funds to Emmanuel Village Homes. She had met with the accused, her sister, and several others toward the end of 2002 at a restaurant. She was trying to determine what had happened to her investment. She described the accused’s grabbing a napkin and drawing out a diagram of how all the money had gone to Emmanuel Village Homes, a revelation to her.
[53] The parties agree that the napkin is admissible for the truth of its contents, but disagree on its evidentiary weight. The Crown relies upon the principles in R. v. Andalib-Goortani, supra and R. v. Evans, supra for the admissibility of the document. The Defense concedes the admissibility of the document as hearsay sufficiently reliable to be admitted at a sentencing hearing.
[54] Although the parties agree on the admissibility of the document, I must still determine its weight. I agree with the Defense that caution is warranted in accepting the details of the diagram, inter alia because it is a copy generated in an uncertain chain of steps from the original. However, what is clear is that it confirms that the accused had substantial knowledge during the execution of the fraud that investors’ monies were being diverted to the Emmanuel Village Homes project in various devious ways.
J. The Role of Singh, Bajaj, and Chowdhry and the Value of their Evidence
[55] Singh, Bajaj, and Chowdhry were involved with the accused in the execution of the fraud; I need not determine whether they were parties to it, since that issue is not before me. I agree with the Defense that in their testimony they generally exaggerated the role of the accused and understated their own complicity in any wrongdoing. I reject the Crown’s argument that Singh and Bajaj were simply duped by the accused. Both the Crown and Defense agree that all three knew that the investors were being misled when their monies were used for Emmanuel Village Homes instead of an offshore investment. I do not accept that Singh and Bajaj did not know that this deception was wrong.
[56] Regarding these three associates of the accused, I am mindful of the principles in R.v. Kanagalingam, supra. I am also mindful of the facts which make those principles applicable to this case, including their complicity in wrongdoing and the fact that all three faced fraud charges for those acts, which charges were withdrawn. More simply, however, because they understated their own complicity in any wrongdoing and exaggerated the role of the accused, I do not rely in my analysis on their testimony in deciding the issue before me.
V. CONCLUSION
[57] The Defense argues in its written submissions that “the evidence did not suggest that Mr. Hunking played a role that was disproportionately or substantially greater than… [his three associates] in the creation or management of …[Netbusmodel] to warrant a finding that he was ‘the directing and controlling mind.’ ”
[58] The defense raised for purposes of the analysis called for in R.v.B.D., supra if such an analysis is called for in this case, is stated in that passage.
[59] On the evidence before me, all of which I have considered, and in particular having regard to the points considered in my analysis, I reject that defense, and find that no reasonable doubt has been raised based on it. Moreover, that I find that the Crown has proven beyond a reasonable doubt that the accused was the directing and controlling mind of the fraud. I find that the accused led the fraud in order to fund Emmanuel Village Homes. It was a project which he brought to the table at Netbusmodel and which he controlled, including through Seip.
[60] The accused was President or key principal of so many corporate entities involved in the fraud that his role as directing mind is apparent. That he was known to the investors as the principal of the investment scheme fits squarely with his role as the directing mind of the fraud. The accused brought the Global Prosperity notions to the workings of the fraud. He was the principal recruiter of the investors and their monies went to Emmanuel Village Homes as he intended.
BLOOM J.
Released: March 14, 2016
CITATION: R. v. Hunking, 2016 ONSC 1749
COURT FILE NO.: 2219/12
DATE: 2016 03 14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HER MAJESTY THE QUEEN
- and -
BRYAN JAMES HUNKING
REASONS FOR JUDGMENT
BLOOM J.
Released: March 14, 2016