R. v. Fontana, 2016 ONSC 7076

CITATION: R. v. Fontana, 2016 ONSC 7076

COURT FILE NO.: CR-12-00007701

DATE: 20161116

CORRIGENDA: 20170116

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HER MAJESTY THE QUEEN

– and –

ANNA FONTANA

COUNSEL:

Phyllis Castiglione, for the Crown

Stefano Fortini, for the Defendant

HEARD: September 26, 27, 28, 29, 2016 and October 3, 4, 5, 2016

REVISED REASONS FOR DECISION

The text of the original Reasons have been corrected with the text of corrigendum

(released today’s date)

EDWARDS J.:

Introduction

[1] Mrs. Edda Marie Favretto-Post (Edda), lent Anna Fontana (Fontana) $150,000 (referred to hereafter as the loan and/or the money) by way of a cheque dated September 27, 2010. The circumstances surrounding the loan arose out of a casual friendship that developed between Edda and Fontana that began at a local coffee shop in Woodbridge. The friendship developed to the point where Edda described Fontana as a likeable, straightforward individual.

[2] During the course of the developing friendship, Fontana advised Edda that she would like to set up her own restaurant but she did not have the necessary funds to do so. Eventually, Edda agreed to lend Fontana the money she needed to start the restaurant. A few days after Edda gave Fontana the cheque, Fontana met with her lawyer and a promissory note was drafted. The note was reviewed by Fontana and her lawyer. Changes were made and the note was executed by Fontana.

[3] The essential terms of the loan, as evidenced by the amended promissory note, were as follows:

a) the loan was interest free for the first year;

b) repayment of the loan would begin in September 2012 with monthly payments of $2,500;

c) the loan was repayable in full in five years.

[4] The loan was unsecured. Edda believed, however, based on a representation she says was made to her by Fontana, that because her home was worth $350,000 she would have no issue getting repaid. Fontana gave her post-dated cheques in the amounts of $4,000 for September 2011, November 2011, January 2012 and March 2012. The first three of these cheques were successfully negotiated through Fontana’s bank account. The fourth cheque was returned to Edda. No further payments were made by Fontana. The loan was never repaid. Without interest Fontana would have owed Edda, as of early 2013, $138,000.

[5] Edda loaned the money to Fontana with, from her perspective, the clear understanding that the money would be used to assist her in the establishment of a restaurant. She had experienced Fontana’s culinary skills at a dinner to which she had been invited at the Fontana home, and had no reason to doubt that Fontana would be successful in her dream of establishing her own restaurant.

[6] When Edda did not receive the payments on the loan, she attempted to contact Fontana without success. She eventually contacted her lawyer, Jordan Sobel (Sobel), who discovered that Fontana had declared bankruptcy. She also discovered, through information provided to her by Sobel, that Fontana had transferred title to her home to her husband just prior to the time that she had given the money to Fontana.

[7] It is not without significance that Edda confirmed she had been advised by both her financial advisor and by her lawyer that she should have security for the loan. She chose not to follow this advice, as she felt that with a house appraised at $350,000 she would never have any issue being repaid. Edda, on more than one occasion in her evidence, emphasized that she believed Fontana was an honest person. She was equally emphatic in making clear that she was now angry, frustrated and needed her money back.

[8] Edda’s sister was called as a witness by the Crown. Laura Favretto lives with her sister and met Fontana at the St. Phillips Bakery on many occasions. She confirmed her sister’s evidence that Fontana had expressed a desire to set up a restaurant. She understood her sister obtained terms that provided for repayment at the rate of $1,000 per month, after an initial year interest free. The monthly amount was subsequently changed to $2,500.

[9] Sobel testified with respect to the renegotiation of the terms of the promissory note that Fontana had presented to Edda after the cheque had been cashed. The first promissory note signed by Fontana provided for repayment at the rate of $1,000 per month on December 1, 2011 with no interest. The first promissory note required repayment of the balance owing on or before December 1, 2016, together with an additional sum of $15,000.

[10] Edda had contacted Sobel with the purpose of meeting with Fontana to amend the terms of the promissory note. A meeting took place on December 9, 2010, attended by Sobel, Fontana and Edda. The original promissory note was amended so as to provide for “annual interest”. The monthly repayment was increased from $1,000 to $2,500. Sobel testified that he had raised with Edda the benefit of having security for the loan but was instructed not to make it an issue.

[11] Subsequent to Fontana’s default, Sobel attended a creditor’s meeting with Edda. The meeting had been arranged by Fontana’s trustee in bankruptcy. It was at this meeting that it was learned Fontana had transferred title to her home. Sobel testified he advised Edda of the possibility of pursuing a fraudulent conveyance action in the civil courts. He was instructed by Edda she did not want to pursue a civil action.

[12] Mr. John Morgan testified in his capacity as Fontana’s former trustee in bankruptcy. Morgan first met with Fontana in early 2012, and subsequently prepared the necessary forms for an assignment in bankruptcy. The necessary proof of loss was sent to Fontana’s creditors, one of whom was Edda. A creditor’s meeting took place in Morgan’s office on August 20, 2012.

[13] At the creditor’s meeting Sobel asked questions relating to the transfer of Fontana’s home, and whether any of the $150,000 was used to service the debt on the Fontana home at 444 Parkwood Ave, Bradford, Ontario. Morgan testified he had in his file a copy of the transfer which took place between Fontana and her husband on September 20, 2010, i.e. seven days prior to Edda giving Fontana the cheque for $150,000. In response to Sobel’s question as to whether any of the loan was used to service the debt on Fontana residence, Mr. Freedman advised that none of the funds were used to service the debt and the monies were lost gambling.

[14] Morgan testified with respect to whether the transfer of the property was a reviewable transaction under Section 96 of the Bankruptcy Act. As the transfer occurred prior to the loan being made by Edda, there was no creditor/debtor relationship between Edda and Fontana and, thus, the transfer was not a reviewable transaction. While the transfer may not have been a reviewable transaction under the Bankruptcy Act, it was nonetheless a highly suspicious transaction given the proximity in time to when Fontana received the money from Edda.

[15] Mr. Gonsalves was called as a representative of Scotiabank to review various entries in Fontana’s chequing and savings accounts. A review of these banking records, marked as Exhibits 12 to 15, confirm that $150,000 was deposited into Fontana’s savings account on September 27, 2010. The deposit of the $150,000 placed Fontana’s savings account into a credit balance of approximately $150,000 as of the end of September 2010. The savings account had a balance of approximately $20 as of the end of February 2012.

[16] A review of the savings account activity between September 2010 and February 2012, demonstrates that the vast majority of the $150,000 was used to cover what can only be described as personal expenses. It is also important to note that the chequing account became a joint account between Mr. and Mrs. Fontana on March 17, 2011. Mr. Gonsalves confirmed that it is not possible to determine after March 17, 2011 who initiated the activity reflected in the chequing account. The savings account was not a joint account. Fontana was the exclusive user of the savings account.

[17] The entries in the chequing account between October 2010 and February 2012 demonstrate that in order to cover overdraft positions in the chequing account, either the bank or Fontana initiated the transfer of funds from the savings account into the chequing account. The chequing account was used for the purchase of items by debit card; for the payment of various credit cards (VISA and Canadian Tire MasterCard); for the payment of a lease ($383); for the payment of utility bills; and the payment of what appears to be various insurance premiums. Both the chequing account and the savings account also demonstrate that there were numerous cash withdrawals from various automated banking machines (ABM machines). Mr. Gonsalves could not assist the court in terms of who accessed the ABM machine or where the ABM machine was physically located. What Mr. Gonsalves was able to testify to regarding the use made of an ABM, was whether it was or was not a Scotiabank ABM. He was able to do this by reference to whether a service charge was debited to the account.

[18] With the benefit of Exhibits 12 to15 and Mr. Gonsalves’ evidence, it is beyond dispute that none of the $150,000 which was loaned by Edda to Fontana was used in connection with the establishment of a restaurant. This was also confirmed by Fontana in a statement that she gave to the police prior to her arrest. The chequing account was consistently used by the account holders for payment of purchases, bill payments, insurance premiums, lease payments and ABM cash withdrawals, which regularly placed the chequing account into an overdraft position. When the chequing account went into overdraft, according to Mr. Gonsalves either the bank or Fontana would then initiate a transfer from the savings account to cover the overdraft position.

[19] What is very apparent from a review of Exhibits 12 to 15, is that while there were numerous cash withdrawals (some of not insignificant amounts; see Exhibit 13, page 16, $7,500 cash given to Fontana), and numerous ABM cash withdrawals ranging from $100 to $400, a significant part of the $150,000 went for common living expenses such as a lease payment, payment of credit cards, payment of utility bills and insurance premiums. On November 18, 2010, Fontana transferred $9,000 to her chequing account that was then used to purchase a bank draft that was made payable to a BMW dealership.

Position of the Crown

[20] The focus of the Crown’s argument was on Edda’s evidence that she lent the $150,000 for one purpose and one purpose only, that being to allow Fontana to set up a restaurant. Put differently, it is argued that Fontana fraudulently misrepresented the purpose for which she sought the loan from Edda. The fraudulent misrepresentation was “the other fraudulent means” that forms the actus reus of the offence. The Crown also suggests that part of Fontana’s fraud can be found in her non-disclosure of important facts – specifically that she used the funds for gambling and to cover personal expenses, together with her non-disclosure of the true title to her home.

[21] Dealing with the ownership of the Fontana residence, the Crown suggests that when Fontana told Edda that the home was appraised at $350,000, she falsely represented that she was the owner of the home. In fact as Morgan’s evidence made clear, the home was transferred from Fontana’s name into the name of her husband seven days prior to the completion of the loan. While this transfer may appear suspicious, it must also be looked at in the context of Morgan’s evidence that the transfer was done as part of a refinancing, and apparently was a requirement of the bank.

[22] As for the mens rea of the offence, the Crown argues that when Fontana began using the money lent to her by Edda for gambling and personal purposes, she knew she was placing Edda’s interests at risk. This is confirmed in Fontana’s statement when she acknowledged that her gambling placed her interests ahead of Edda (See Transcript pages 16 to 18).

Defence Position

[23] Responding to the Crown’s argument that the “fraudulent means” was Fontana’s fraudulent misrepresentation as to the purpose of the loan and the true status of her home, Mr. Fortini argues that there is no evidence before the court of any deceit or falsehood on the part of his client. Mr. Fortini suggests that not only is there no evidence of a fraudulent misrepresentation, he goes further to suggest there is no evidence of any misrepresentation whatsoever.

[24] Mr. Fortini suggests that at all times his client intended to repay the loan. In support of that argument he rhetorically asks, why would Fontana offer up a promissory note after she had received the cheque when Edda had never asked for a promissory note? As well, it is suggested that the fact Fontana gave Edda four post-dated cheques in advance of the due date for payment demonstrates Fontana’s lack of a guilty mind and, to the contrary, demonstrates her intention to abide by the terms of the promissory note.

[25] Responding to the suggestion that the actus reus of the offence charged can be found in Fontana’s fraudulent means in inducing Edda to lend her money based on a representation the money would be used to set up a restaurant, Mr. Fortini argues that the complete terms of the loan and the contract with Edda are found in the promissory note. The promissory note, he argues, contains all of the terms, and nowhere in that promissory note is there any reference to the reason why the money was advanced nor is there any restriction in how, when, or by who money could be accessed by Fontana. In short, Mr. Fortini argues that this case is really nothing more than a civil dispute that ended badly, with Fontana exercising her legal rights to declare bankruptcy.

[26] As for the suggestion Fontana somehow misled Edda into believing her home would stand as security for the loan, Mr. Fortini argues - in my view correctly, that the evidence establishes that at no time did Edda ever ask for security for her loan. In fact, the evidence points in an opposite direction. When the terms of the initial promissory note were renegotiated in December 2010, Edda had the benefit of the advice from her lawyer, Mr. Sobel, who testified he advised Edda to require security for the loan, advice which she rejected. As well, Edda herself testified that even before extending the loan to Fontana in September 2010, she had received advice from her financial advisor and others that she should have security for the loan.

[27] Mr. Fortini also argues that there is no evidence that Fontana did not intend to repay the loan, nor any evidence that she could not or would not repay the loan - at least until she exercised her right, on the advice of counsel, to declare bankruptcy.

[28] As for the suggestion his client did not pursue her dream to set up a restaurant, it is argued that the evidence is to the contrary. In that regard, Mr. Fortini notes the evidence from Fontana’s police statement as to the efforts she put into looking for a suitable location, evidence which in part was corroborated by Edda and her sister Laura. Both Edda and Laura testified to at least two excursions they made with Fontana looking at prospective locations for a restaurant. While there was evidence concerning the possibility of establishing a restaurant, none of the money lent to Fontana was spent on anything to do with the establishment of a restaurant. This evidence can be found in the bank statements entered into evidence, as well Fontana’s own evidence found in her police statement where she confirmed none of the money was spent on a restaurant.

[29] While the Crown asserts there is no evidence Fontana intended to repay the loan, Mr. Fortini argues there is “ample evidence” Fontana did intend to repay the loan. The evidence in that regard is found in the fact Fontana had no obligation to document the loan by way of a promissory note. She had the promissory note drafted by her lawyer and presented it to Edda a day after the cheque was cashed. As well, Mr. Fortini points to the events of December 9, 2010, when Fontana met with Edda and her lawyer and renegotiated the terms of the promissory note. As well, it is argued that the evidence supports the conclusion that at the same meeting Fontana turned down Edda’s offer of a further $50,000. If Fontana had fraudulent intentions why, it is rhetorically asked, would Fontana renegotiate the terms that were not favourable to her and why would she turn down another $50,000?

[30] Finally, it is argued that what this case is all about is a civil dispute where Edda lent money without security, despite the legal and financial advice she received from her professional advisors. The money was not repaid and Fontana has gone bankrupt, leaving her without a civil remedy. Left without a civil remedy, Edda went to the police and charges were laid - charges which the defence says should never have been laid.

Analysis

[31] The fundamental question confronting this court is to determine whether the acceptance of the loan proceeds was accompanied with a condition that the money was to be used exclusively for the establishment of a restaurant. If that condition is established, then the question becomes whether a reasonable person would stigmatize what Fontana did with the money as a dishonest act. To use the words of the Supreme Court of Canada in R. v. Zlatic, 1993 CanLII 135 (SCC), [1993] 2 SCR 29, dishonest conduct can be defined as conduct “which ordinary, decent people would feel was discreditable as being clearly at variance with straightforward or honourable dealings”. At its heart, the dishonesty of “other fraudulent means” connotes the wrongful use of something in which another person has an interest, in a manner that the interest of the other person is put at risk or extinguished. The “wrongful” use in this regard is conduct that reasonable and decent people would consider dishonest and unscrupulous – see Zlatic, supra, at para. 32.

[32] I accept the evidence of Edda that she intended the money that she lent to Fontana to be used for one purpose and one purpose only, i.e., the establishment of a restaurant. Her evidence is corroborated by Fontana, who in her statement leaves little doubt she understood why the money had been loaned to her. As soon as she received the money and deposited it to her bank account, she recites all of the efforts she made to begin the process of setting up a restaurant (See Transcript, pages 9, 12 and 18 of Exhibit 20). If Fontana had thought the money was lent to her for reasons unrelated to the establishment of a restaurant, one might reasonably question why she was so concerned about satisfying Edda with her efforts to locate and begin the process of setting up a restaurant.

[33] Would ordinary decent people consider Fontana’s actions in accepting the money for the establishment of a restaurant, and then using it for personal expenses and gambling dishonest conduct? Would the ordinary decent person consider the depleting of the loan proceeds by nearly $80,000 within five months of the loan being made, the actions of an honest person where none of the monies went into the restaurant business? Would the ordinary decent person consider the use of the loan proceeds for a $9,000 payment for a BMW within seven weeks of receiving the loan proceeds, the actions of an honest person? Having accepted the money from Edda with the clear understanding the money was only to be used to establish a restaurant, Fontana’s actions almost immediately upon receiving the money demonstrated a reckless disregard for Edda’s interests.

[34] The defence argues the terms of the loan between Edda and Fontana are found exclusively in the promissory note. The promissory note makes no mention of the purpose for which the monies were loaned to Fontana and, as such, the defence essentially argues Fontana was at liberty to use the money for whatever she wanted. As long as the terms of the promissory note were complied with, i.e. repayment within a stipulated period of time in the agreed upon monthly amounts, Fontana had no obligation to use the monies towards the establishment of a restaurant.

[35] What the aforesaid argument fails to consider is what happened before the loan was extended and the promissory note created. Fontana lead Edda to believe she needed money to follow her dream in establishing a restaurant business. There was no discussion about lending money to allow Fontana to pay personal expenses; buy or lease a BMW; or fund a gambling habit. The sole reason Edda loaned money to Fontana was to help her set up a restaurant. Fontana knew that, as evidenced from her statement to the police.

[36] Fontana was advised by police officer MacDonald, who took her statement, that he was investigating allegations that “the monies were taken and not used toward – it didn’t go towards where it was supposed to go” (Exhibit 20, Transcript, page 3). In response to questions put to her by MacDonald during the course of the interview, Fontana stated:

That night, I get a call from Etta (ph.). It was either that night or the following morning and she said to me, “Anna,” she said, “I understand that you and Laura were chatting about,” ah, “opening up a bakery or a restaurant type o’ thing.” I said, “We were chatting about it.” I said, “We always chat about opening up a place.” She said, “Well, I would like to help you.” She says, “I have some money sitting in an account,” she said, “and I’d be willing to – to loan it to you.” I said – ah – I – I was overwhelmed. Like, who does that? Ah, I didn’t know how to, ah, express myself.

Fontana also stated as follows:

When she gave me this money - when she gave me the money, the - the - she said to me, “I’m gonna give you this money and I want you,” ah, “to let me know,” - you know, “Keep in touch with me…so we know what is going on.” I said, “That’s fine. I got no problem with that.” (Transcript, page 9).

[37] Nowhere in her statement that she gave to the police does Fontana give any indication that the money she received from Edda was given to her to be used as she saw fit, i.e. to pay for personal expenses; purchase or lease a BMW or to fund gambling. Fontana knew she was at the police station to respond to an allegation that the money was used for purposes that it was not intended for (See Exhibit 20, Transcript, page 3). Fontana goes, though, in considerable detail what she did in terms of trying to set up a restaurant business and how she had no luck in finding a suitable location. Fontana may have had entirely honest intentions when she accepted the money. She may have honestly believed she could set up a restaurant business. She equally knew that Edda lent her the money for one purpose and one purpose only - that being to help her set up a restaurant business. She also knew Edda expected to be kept informed of how things were progressing. When she was unsuccessful in her efforts to locate and establish a restaurant, Fontana never advised Edda of her lack of success - but more importantly, she never advised Edda she was using the money for purposes wholly unrelated to the establishment of a restaurant.

[38] Based on Fontana’s own statement to the police and also based on Edda’s evidence, I have no difficulty in coming to the conclusion that Edda was induced to loan the money to Fontana on the basis of Fontana’s representation that she needed the money to establish a restaurant business. I also infer from Fontana’s statement that she knew she had an obligation to keep Edda apprised of how things developed so that Edda knew how her money was spent. Fontana never advised Edda of how she was spending the money. When Fontana failed in her efforts to set up a restaurant and began using the money for personal purposes, she did so dishonestly. To use the words of the Supreme Court in Zlatic, the ordinary individual would have little difficulty concluding that Fontana’s actions were dishonest. Her initial actions may have been honest; they became dishonest very soon after she accepted the money and she became frustrated in her efforts to set up a restaurant.

[39] As to whether Fontana had the necessary mens rea of fraud, the questions to be answered are whether the Crown has established that Fontana had the subjective knowledge of the prohibited act, and whether she had the subjective knowledge that the prohibited act could have, as a consequence, the deprivation of another – in this case Edda. The deprivation, as noted at para. 26 of Zlatic, may consist in the knowledge that the victims pecuniary interest are put at risk - or as it may relate to the facts of this case, the deprivation would consist in Fontana’s knowledge that Edda’s money was put at risk.

[40] When Fontana used the loan proceeds to pay for personal expenses, she may have acted dishonestly because she knew she was not using the money for expenses in relation to a restaurant, but in my view she did not necessarily have the mens rea to commit the offence of fraud. Specifically, it cannot be said that when she used the loan proceeds for personal expenses that she knew she was putting Edda’s money at risk.

[41] However, when she used the loan proceeds for gambling I am satisfied the Crown has established the necessary mens rea of fraud. In that regard I refer to para. 42 of Zlatic, where McLachlin J. (as she then was) stated:

In short, there is nothing in the evidence which negates the natural inference that when a person gambles with funds in which others have a pecuniary interest he knows that he puts that interest at risk: See Theroux at pp.18 and 21. On the contrary, the accused expressly acknowledged that he was aware of the risk.

[42] Fontana knew what was she doing was wrong and was dishonest. At page 18 of the transcript of her police interview, she states:

…I ranged (ph) up my credit card, stole money from my husband. Not stold (ph); I took money from my - my own money; money that I had that - that I was supposed to start this business with and I caused a disaster. I went to Georgian Downs, still thinking that I could control my gambling….

[43] Later in her interview she was asked how much of the $150,000 went into the restaurant business, to which she said nothing. She was then asked how much went to Georgian Downs, i.e. gambling, to which advised “a fair bit”. Fontana’s actions in gambling away what she describes as a “fair bit” of the loan proceeds, establishes the necessary mens rea to establish her fraud.

[44] While I agree with the defence submission that this case involves a civil dispute arising out of a simple loan transaction between Edda and Fontana, the fact that it is a civil dispute does not mean that Fontana’s actions were not also criminal. Her actions started out honestly. If she had spent the money in establishing a restaurant business that failed and then declared bankruptcy, this case would never have seen the inside of a criminal courtroom. Edda would have lost her hard-earned retirement nest egg, but she could have followed the advice of her advisors and obtained security for the loan. She chose not to do so, and as is so often in civil cases Edda would have been entitled to pursue a remedy in the civil courts. She may have obtained a judgement, but been left with no ability to recover on the judgement.

[45] The facts of this case are different however. Fontana’s actions became criminal when she knew she was placing Edda’s money at risk by first of all not using the money towards a restaurant business, and secondly when she began using the money to fuel her gambling habit. A conviction on count one of fraud over $5,000 shall be endorsed on the indictment.

Fraud by Conversion

[46] In addition to the Fraud charge laid under section 380(1)(a) of the Criminal Code, Fontana was also charged with Fraud by Conversion, contrary to section 322(1) of the Criminal Code. The charge reads that Fontana fraudulently and without colour of right converted to her use money of a value exceeding $5,000 with an intent to deprive temporarily or absolutely, Edda of the said money.

[47] As I have already reviewed in my Reasons set forth above, when Fontana began using the loan proceeds for purposes other than related to the setting up of a restaurant, she did so dishonestly. When she used the loan proceeds not only for personal purposes but also for gambling, she did so without any colour of right and with the sole intent of depriving Edda of her money.

[48] As I have already indicated, there may have been a point in time when Fontana received the cheque honestly believing that she would use those funds to set up a restaurant business. The question then arises, if Fontana initially received the loan proceeds innocently, under what circumstances would a subsequently formed intention to steal be ascribed to her?

[49] The answer to the aforesaid question can be found in cases where an accused innocently takes goods and ultimately becomes aware that the goods were not abandoned and owned by someone else. In that regard, the court was referred to the decision of the British Columbia Court of Appeal in R. v. Konken, 1971 CanLII 1326 (BC CA), [1971] 3 W.W.R. 752, where at paragraph 19 McFarlane J.A. stated:

Now there is no doubt that if an accused innocently takes goods and subsequently becomes aware that the goods were not abandoned but were owned by someone, then, if he retains the goods, he may be guilty of theft by conversation under s. 269…

[50] A similar analogy can be found in cases where an individual has monies inadvertently placed into his or her bank account, or receives monies that were overpaid. In that regard, the comments of the Supreme Court of Canada in R. v. Milne, 1992 CanLII 86 (SCC), [1992] S.C.J. No. 28, at paras. 23 through 25, help inform this court with respect to the ultimate disposition of the fraud by conversion charge laid against Fontana.

In this case, both the subjective and objective intention of the Hudson’s Bay Co. was to pass property in the cheque. What the Crown identifies as the subjective intent not to pass property relates instead, in terms of the criminal law, to the motive for the transaction. In this case, the motive of the Hudson’s Bay Co. was to pay Mr. Milne’s company for services rendered. Of course, this motivation was based on an error, in that payment had already been made, yet given this error the Hudson’s Bay Co. fully intended for property in the second cheque to pass to Mr. Milne’s company. The law of property creates a right of recovery because of the particular character of the mistaken motive in this case. However, this does not mean that the Hudson’s Bay Co. did not intend property to pass.

Therefore, the nature of the distinction identified by Côté J.A. is not contrary to the general precepts of criminal law. Indeed, there is a sense in which it is consonant with those precepts, in so far as it focuses upon intent as distinguished from motive. However, assuming that the method by which Côté J.A. distinguishes between void and voidable mistaken transfers is correct, be it from the point of view of property law or criminal law, there remains the logically prior question as to whether the distinction itself is necessary or has any purpose in the context of the criminal law. As can be seen in R. v. Stewart, 1988 CanLII 86 (SCC), [1988] 1 S.C.R. 963, issues surrounding the law of property may look very different in the context of the criminal law than in the context of the civil law, where the purposes of these two branches differ.

The purpose of the distinction between void and voidable in the context of the law of property is largely (though perhaps not exclusively) to protect innocent third parties who have relied on the legitimacy of the transaction which has apparently taken place. Such a purpose has no analogue in the criminal law. The criminal law is concerned with the guilt or innocence of the accused, and to this end focuses on the actions and knowledge of the accused. The criminal law does not affect the interests of third parties in the way that the law of property can. The fact that Mr. Milne in a case such as this may face criminal sanction for his acts would not affect the property claim of an innocent third party to whom the property had passed in the meantime.

[51] When Fontana received the cheque from Edda, as I have already made clear she likely had honest intentions and those intentions – at least initially, were demonstrated by her preliminary efforts in trying to find a suitable location for a restaurant. The evidence, however, makes abundantly clear that those efforts were short-lived, and very quickly the evidence demonstrate that Fontana began using the money lent to her for personal purposes and for gambling. Fontana knew that the funds had only been extended to her as a loan for the purpose of setting up a restaurant. When she used the loan proceeds for gambling she had no colour of right in those monies, and she knew that by gambling away the money she was depriving either temporarily or absolutely, Edda of her money. I therefore find Fontana guilty of the offence of Fraud by Conversion. A conviction on count two shall also register against Fontana.

Released: January 16, 2017 Justice M.L. Edwards

CORRIGENDA

1. Page 10 subheading “Fraud by Conversion” should read “Theft by Conversion”

2. Paragraph [46] – second line should read “…was also charged with Theft by Conversion…”

3. Paragraph [50] – last line should read “…theft by conversion charge laid against Fontana”

4. Paragraph [51] – second last line should read “…guilty of the offence of Theft by Conversion”

CITATION: R. v. Fontana, 2016 ONSC 7076

ONTARIO

SUPERIOR COURT OF JUSTICE

HER MAJESTY THE QUEEN

– and –

ANNA FONTANA

REVISED REASONS FOR DECISION

Justice M.L. Edwards

Released: January 16, 2017