R. v. Beattie, 2017 ONSC 7686

CITATION: R. v. Beattie, 2017 ONSC 7686

COURT FILE NO.: CR-15-0000000-1-0000

DATE: 20171211

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TERRY LYNN BEATTIE Applicant

– and –

HER MAJESTY THE QUEEN Respondent

Jeff Marshman and Eric Brousseau, for the Applicant

Mike Kelly and Philippe Cowle, for the Respondent

HEARD: December 8 and 11, 2017

THORBURN J.

RULING RE APPLICATION FOR DIRECTED VERDICT

Part I. The Issues

1The Applicant (accused), Terry Lynn Beattie, aka Terri Ramage, is charged with making, circulating or publishing a prospectus she knew was false in a material respect between February 1, 2007 and July 3, 2008. The alleged fraudulent misrepresentation is that Onco Petroleum Incorporated raised $22,377,600 from a private placement of shares which was included in the company’s assets and share capital to (a) induce persons, whether ascertained or not, to become shareholders in Onco Petroleum Incorporated; and/or (b) deceive or defraud the shareholders, whether ascertained or not, of Onco Petroleum Incorporated contrary to section 400 of the Criminal Code of Canada.

2The Crown has closed its case and the Applicant elected not to testify.

3She brings a motion for a directed verdict.

4A directed verdict is entered where there is no evidence upon which a jury properly instructed and acting reasonably, could convict. (U.S.A. v. Shephard, 1976 8 (SCC), [1977] 2 S.C.R. 1067.)

5It is agreed that the prospectus contained a material misrepresentation, namely that Onco Petroleum Incorporated had raised $22,377,600 from a private placement of shares. It is also agreed that investors were defrauded.

6The key issues are whether a reasonable jury properly instructed could be satisfied beyond a reasonable doubt that the Applicant,

a) knew and/or was wilfully blind to the fact that the prospectus contained a material misrepresentation on or before July 3, 2008;

b) made, circulated or published the prospectus that contained the material misrepresentation; and

c) was a party to the offence as a principal, by being wilfully blind and/or by aiding and/or abetting the key offender.

7If she did, it is conceded that a properly instructed jury could reasonably conclude beyond a reasonable doubt that she did so with the intention to defraud investors.

Part II. The Law

8A trier of fact should make the determination as to the appropriate verdict after hearing all of the evidence, where "there is admissible evidence which could, if it were believed, result in a conviction." (United States of America v. Sheppard, 1976 8 (SCC), [1977] 2 S.C.R. 1067 at p. 1080, as reaffirmed in R. v. Arcuri, (2001), 2001 SCC 54, [2001] 2 S.C.R. 828, per McLachlin C.J.C. at paras. 30-31.)

9On a motion for a directed verdict, the judge must determine the sufficiency of the evidence; that is, whether the evidence is capable of supporting a verdict of guilt beyond a reasonable doubt. The Crown must adduce “some evidence of culpability” for every essential element of the offence charged. If not, the judge must direct an acquittal. (R. v. Charemski, 1998 819 (SCC), [1998] 1 S.C.R 679, at paras. 3, 20.)

10That evidence may be adduced by direct or circumstantial evidence. Circumstantial evidence is evidence that tends to prove a fact by proving other events or circumstances from which the occurrence of another fact can be reasonably inferred. (R. v. Cinous, 2002 SCC 29, [2002] 2 S.C.R. 3, at para 89.)

11The test to be applied in the case of both direct and circumstantial evidence is the same but the process to be engaged is different.

12Where there is direct evidence as to every element of the offence, a judge does not weigh the evidence on an application for a directed verdict. The only conclusion that needs to be reached is whether the evidence is true. (Cinous, at para. 88.)

13Where there is only circumstantial evidence, the standard to be met is the same but the judge must engage in limited weighing of the evidence to determine whether the evidence, considered as a whole, is reasonably capable of supporting the inference the Crown seeks to have the trier of fact draw about that essential element because inferences must be drawn from the evidence. The inferences must be ones which can be reasonably and logically drawn from a fact or group of facts established by the evidence. (R. v. Morrissey (1995), 1995 3498 (ON CA), 22 O.R. (3d) 514 (C.A.), at p. 530, per Doherty J.A.; Arcuri; R. v. Bains, 2015 ONCA 677, 328 C.C.C. (3d) 149 (Ont. C.A.), at para. 159, per Watt J.A.)

14The limited weighing of circumstantial evidence on an application for a directed verdict does not entitle the judge to draw factual inferences, assess credibility or ask whether he or she would find guilt established if assigned the role of trier of fact. Provided the judge concludes that the evidence as a whole, if believed, could reasonably support an inference of guilt, a directed verdict motion will fail. This limited weighing means that the trial judge must assess the evidence in a way that is most favourable to the Crown: see Arcuri, at paras. 23, 30, 33; R. v. Pettipas-Lizak, 2017 ONCA 963.

15The word “inference” is defined in the Oxford English Dictionary, 2nd Ed., (Oxford, UK: Clarendon Press, 1991) vol. VII, at p. 924, as follows:

The drawing of a conclusion from known or assumed facts or statements; the forming of a conclusion from data or premises, either by inductive or deductive methods; reasoning from something known or assumed to something else which follows from it… a conclusion drawn from data or premises. Also an implication; the conclusion that one is intended to draw.

16Inferences to be drawn from circumstantial evidence need not be “compelling” or even “easily drawn” in order to be reasonable. If there are competing inferences, these are for the trier of fact to resolve. It is a jurisdictional error to weigh competing inferences or choose among them. (R. v. Katwaru (2001), 2001 24112 (ON CA), 52 O.R. (3d) 321 (C.A.), at para. 40, per Moldaver J.A.; R. v. Munoz (2006), 2006 3269 (ON SC), 86 OR (3d) 134, at para. 21.)

17As the Court of Appeal said in R. v. Dwyer, 2013 ONCA 368, [2013] O.J. No. 2554, at para. 4: “Reasonable inferences are not necessarily likely or probable inferences….Difficult inferences to draw may still nonetheless be reasonable.” The court in R. v. Villaroman, 2016 SCC 33, [2016] 1 S.C.R. 1000, at para. 30, provides that,

… in a case in which proof of one or more elements of the offence depends exclusively or largely on circumstantial evidence, it will generally be helpful to the jury to be cautioned about too readily drawing inferences of guilt. … Telling the jury that an inference of guilt drawn from circumstantial evidence should be the only reasonable inference that such evidence permits will often be a succinct and accurate way of helping the jury to guard against the risk of “filling in the blanks” by too quickly overlooking reasonable alternative inferences.

18The first step in inference drawing is to provide the evidentiary basis for the inference. There can be no inference unless there are objective facts from which to infer the other facts sought to be established. (Munoz, at para. 26.)

19Secondly, the facts adduced must reasonably support the inference sought to be drawn: that is, the conclusion must be inherent in the relationship between the evidentiary premises. An inference which does not flow logically and reasonably from the evidence is condemned as conjecture and speculation. (Morrissey, at p. 530, per Doherty J.A.; Caswell v. Powell Duffryn Associated Collieries Ltd., [1994] A.C. 152 (H.L.), at pp. 169-170.)

20Gaps between inferences can only be filled by evidence. In United States of America v. Huynh, 2005 34563 (ON CA), [2005] O.J. No. 4074 (C.A.), at paras. 5-7, Doherty J.A. held as follows:

The appeal comes down to a determination of two issues. First, did the evidence reasonably permit the inference that the cash was the proceeds of trafficking in a controlled substance? Second, if the evidence did not permit that inference, was identification of the designated offence as trafficking in narcotics mere surplusage and, therefore, not something which had to be proved even on a prima facie level? The extradition judge did not address these issues in his reasons for committal.

The respondent contends that the following evidence permitted the reasonable inference that the cash was the proceeds of trafficking in a controlled substance:

• the amount of cash involved;

• the frequency with which cash was being transferred from the United States to Canada;

• the manner of concealment of the cash suggesting a level of sophistication and a commercial operation;

• the coded conversations of participants and their obvious concerns about surveillance; and

• the anticipated evidence of a DEA officer that the modus operandi was consistent with the activities of drug dealers.

The material identified by the respondent certainly permits the inference that the cash was the proceeds of some illicit activity. Drug trafficking comes readily to mind as one possible source. The process of drawing inferences from evidence is not, however, the same as speculating even where the circumstances permit an educated guess. The gap between the inference that the cash was the proceeds of illicit activity and the further inference that the illicit activity was trafficking in a controlled substance can only be bridged by evidence. The trier of fact will assess that evidence in the light of common sense and human experience, but neither are a substitute for evidence. The requesting state has not offered any evidence as to the source of the funds even though its material indicates that one of the parties to this conspiracy is cooperating with the police. Despite the effective argument of counsel for the respondent, I do not think there is anything in the material that would reasonably permit a trier of fact to infer that the cash was the proceeds of drug trafficking and not some other illicit activity.

21The judge’s role on an application for directed verdict is to say whether any facts have been established by evidence from which other matters may reasonably be inferred.

22It is necessary to consider the cumulative effect of the evidence said to point towards guilt on the part of the accused. Especially in a case premised wholly or in large measure upon circumstantial evidence, it is improper to isolate a particular piece of evidence and to then discuss any probative force flowing therefrom without regard to the context of the totality of the evidence. (R. v. Turner (OCA) 2012 ONCA 570, 292 CCC (3d) 69.)

23The trier of fact determines whether on the basis of those facts, the matter ought to be inferred. (Cinous, at para. 91.) The court should review the entirety of the circumstantial evidence together with any inferences that could reasonably be drawn. (R .v. Campbell (1999), 1999 2372 (ON CA), 140 C.C.C. (3d) 164, at para. 6.)

24Where there is contradictory evidence that gives rise to competing inferences, the place to assess those competing inferences is at trial. (R. v. Bogiatzis, [2002] O.J. No. 736 (S.C.), at para. 25.)

Part III. Analysis of the Evidence

The First Essential Element of the Offence: Knowledge that the representation was false and that it was being used to induce potential investors or deceive existing investors and creditors

25The first element of the offence is whether the Applicant knew and/or was wilfully blind to the fact that the prospectus contained a material misrepresentation.

26The Applicant suggests that a reasonable jury properly instructed could not find that on or before July 3, 2008, she knew or was wilfully blind to the fact that Onco did not actually have the $20 million referred to in the prospectus, because the evidence at trial was that she was not a sophisticated person who understood finance, and she was not on the audit committee and involved in the preparation of the prospectus. She was simply provided with the preliminary prospectus that included reference to the $20 million and signed it. She and other Board members were provided financial statements in October 2007 but the uncontradicted evidence is that she was not well versed in financial matters. She suggests the only reasonable inference to be drawn from this is that she was simply doing what she was told and had no understanding that Onco was short $20 million when the prospectus was filed or thereafter.

27Knowledge in this context includes actual knowledge and wilful blindness. In order to be wilfully blind, a party must know or be wilfully blind to the fact that the prospectus was false and make, circulate or publish it to induce investors or deceive existing investors. Knowledge can include suspecting but refraining from obtaining final confirmation because the accused wants to be able to deny knowledge. (R. v. Briscoe, 2010 SCC 13, [2010] 1 S.C.R. 411.)

28The evidence adduced by the Crown in support of knowledge that the representation was false and was being used to induce and/or deceive investors is as follows.

29The Applicant was:

a) a founding member of the company (Onco Petroleum) and one of its largest shareholders;

b) Vice Chair, Secretary and Treasurer of the company with signing authority on behalf of the company and access to its books and records;

c) doing the bookkeeping in the early stages and paying bills throughout;

d) Treasurer when the private placement was put in place for the $20 million;

e) member of the Board of Directors who attended board meetings; and

f) involved in a personal relationship with the founder and primary moving force behind Onco.

30While in this role, the Applicant,

a) voted in June 2007 to approve the filing of the prospectus;

b) signed a provision in the prospectus that the prospectus constitutes “full, true and plain disclosure of all material facts” where the prospectus provides that Onco had available to it, over $20 million (Several revised versions of the prospectus did not bear her signature.);

c) was presented with the Onco financial statements at the Board meeting on October 25, 2007 (after the prospectus was filed);

d) arranged for an accountant to deal with the books of Onco USA; and

e) signed most of the cheques on behalf of Onco.

31At this time, the Crown suggests it is reasonable to infer that she knew or was wilfully blind that the $20 million was not there (as stated in the prospectus). The Crown also contends that her knowledge can be reasonably inferred from her failure to act or react to any of the following unusual occurrences:

a) the auditors, vendors, Onco’s lawyer and others advised that they were not being paid although, on the books, Onco had over $20 million invested in the company. The Applicant did not respond;

b) on May 9, 2008, a Notice of Temporary Cease Trading was served on the Applicant and Vanier, to which she did not respond;

c) in May 2008, a large number of cheques for significant sums (ranging from $25,000 to $85,000) were signed, deposited and then transferred to different places within days for no apparent reason. Some of those cheques were signed by the Applicant. There is no evidence that she did or said anything;

d) on May 28, 2008, counsel for Onco resigned as counsel and from the Board. In his letter to the Board he said that one of the reasons he was resigning was that he no longer wanted to be exposed as he had concerns about the status, amount and availability of Onco’s funds;

e) in June 2008, Ms. Williams told the Applicant that the landlord was not being paid to rent the premises for Onco USA. The Applicant expressed no surprise and simply told Ms. Williams to move Onco USA’s offices to Ms. Williams’ home;

f) on June 18, 2008, Ms. Williams told the Applicant she had not been paid. The Applicant did not react although there was supposed to be $20 million in Onco’s account, she had a personal relationship with Ms. Williams, and she signed most of the cheques for Onco. Instead she expressed no reaction to this news; and

g) on July 3, 2008, a temporary cease trading order and hearing were ordered. All trading in the shares was now prohibited. There is no evidence that she took any action.

32The Crown contends that the Applicant’s actions after the cease trading order on July 3, 2008, are also consistent with a reasonable inference that she knew the money was not there and that she was continuing to deliberately withhold this information to the detriment of other investors. In particular:

a) in mid-July 2008, Onco’s CFO, Steve Brazier approached the Applicant looking for $3.3 million that he was told by Vanier had been deposited to the Bank. He couldn’t find the money. He spoke to the Applicant about it in July 2008. When he asked, “Where is the $3.3 million”, she responded, “Who the fuck are you?” and said nothing further to respond to his reasonable concern about Onco’s finances;

b) Mr. LaCasse testified that in mid-July 2008, he sent an email to Mr. Vanier and the Applicant after reviewing the unaudited financial statement for December 31, 2007 which provides that there was an obligation on Onco to repay Mr. Vanier and the Applicant over $19 million. He told them to return the money. The Applicant did not respond. The Applicant instead signed a balance sheet that Onco had $20 million as of December 2007; and

c) on September 25, 2008, the Applicant signed an agreement giving up a portion of her shares and her position as director of the company without explanation.

33The Applicant submits that a properly instructed jury could not reasonably conclude beyond a reasonable doubt that she knew the reference in the prospectus that Onco had over $20 million was false. Although she was a board member, the witnesses who did testify, stated that she said nothing at Board meetings, she was not part of the prospectus team, she worked only sporadically at Onco and none of the witnesses said they discussed the contents of the prospectus or the $20 million with her. She notes that there is no evidence that she ever tried to sell any of her own shares. The Applicant claims therefore that there is no evidence upon which a jury could reasonably conclude that she knew the prospectus she approved provided that Onco had $20 million in a bank account when it did not, at the time the prospectus was filed or thereafter up to and including July 3, 2008 (the end of the period in the indictment, when the cease trade order was imposed on Onco.)

34I do not agree.

35Upon consideration of the evidence as a whole, it is possible to reasonably infer from the role assumed by the Applicant, her ability to access information, the significance of $20 million investment to a start-up company this size (this was the single biggest source of money for Onco), the fact that she signed most of the Onco cheques, her attendance at Board meetings and her signing of the prospectus filed, that she knew about the $20 million private placement in the prospectus and knew that it would be used to induce and encourage investors.

36The evidence adduced by many witnesses that she did not react in any way or take any steps when she was advised that Onco was unable to meet its financial commitments, and concerns that significant sums were missing notwithstanding the purported $20 million private placement, is evidence from which the trier of fact could reasonably infer that the Applicant knew Onco’s $20 million private placement was not available to cover the amounts owing. This inference could reasonably be made whether or not she was a sophisticated business person.

37Taken together, this satisfies me that there is some evidence upon which a jury properly instructed and acting reasonably, could conclude beyond a reasonable doubt that the Applicant knew or was wilfully blind to the fact that $20 million referred to in the prospectus and said to have been in Onco’s account was missing and, based on her subsequent failure to find out where the $20 million was or raise concerns, a reasonable jury could conclude that she failed to take any of these steps because she knew the money was not there or had strong suspicions, but refrained from making inquiries to have those suspicions confirmed on or before July 3, 2008, because she did not want to acquire knowledge. (Briscoe).

38For these reasons, a reasonable jury properly instructed could find that the first essential element has been made out beyond a reasonable doubt.

The Second Essential Element of the Offence: Make, Circulate or Publish a Prospectus

39The terms “make, circulate or publish” in section 400 of the Criminal Code, R.S.C. 1988, c. C-46, are not defined in the Criminal Code or in the Securities Act, R.S.O. 1990, c. S.5, which governs the actions of corporate directors. The Oxford English Dictionary defines them as follows:

Make: “form by putting parts together or combining substances, create”.

Circulate: “move or cause to move continuously or freely through a closed system or area of pass or cause to pass from place to place or person to person”. The French version refers to “mettre en circulation”.

Publish: “prepare and issue for public sale or print in a book or journal so as to make it generally known or make available online.”

40The Applicant suggests that circulate (like make and publish) refers to a positive act on the part of the accused such as providing copies of a prospectus to shareholders or investors. The only allegation in this case is that the Applicant failed to act when the Crown suggests she knew or was wilfully blind. The Applicant submits that the ordinary meaning of the word circulate does not include the failure to act and submits that any ambiguity should be interpreted in favour of the Applicant. (Marcotte v. Canada (Deputy Attorney General), 1974 1 (SCC), [1976] 1 S.C.R. 108 at 115.) If Parliament intended to create a positive legal duty to act they should have said so.

41She further suggests that even if she did act by signing the preliminary prospectus and approving the filing of the prospectus with the Securities Commission at a Board meeting, knowing that it would be posted, she did so before she knew that the prospectus was false.

42I do not agree.

43A Board of Directors is a group of individuals elected to act on behalf of and as representatives of the stockholders, to conduct activities on behalf of the company and to make decisions on major company issues. In this case, the Board of Directors signed the prospectus and approved its filing on SEDAR. In so doing, the Applicant as a Board member acted by signing the prospectus and approving the filing thereby making, circulating and publishing the prospectus.

44The Applicant attended the Board meeting on June 22, 2007 when the Board empowered a subcommittee to prepare the prospectus. She signed the preliminary prospectus that contained the representation as to the $20 million private placement investment in Onco and signed a document attesting to the truth and accuracy of the information contained in the prospectus. The provision regarding the $20 million did not change in later iterations of the prospectus, which final version was filed in October 2007. She attended another Board meeting where the Board approved the prospectus subcommittee’s filing of the prospectus.

45Her later actions could allow a reasonable jury properly instructed to conclude that she knew or must have known the reference to the $20 million private placement was false as not one of these unusual occurrences led her to say or do anything when it is reasonable to assume that a person in her position would have.

46A reasonable jury properly instructed could also conclude that the Applicant who made, circulated and/or published the prospectus that contains the material misrepresentation continued to circulate the prospectus as long as investors continued to rely on the contents being circulated and thereby were misled, until such time as the cease trading order was imposed. To find otherwise would create an absurd result and frustrate the intention of Parliament.

47In R. v. Cox, 1963 78 (SCC), [1963] S.C.R. 500, the court held that the offence of making circulating or publishing a false prospectus is really one offence and the making, circulating or publishing are merely modes in which the offence may be committed. The essence of the offence is to attempt to induce persons to advance money to a company by means of a prospectus known to the accused to be false in a material respect.

48For these reasons, a reasonable jury properly instructed could find that the second essential element has been made out beyond a reasonable doubt.

Party Liability

49There is some evidence upon which a reasonable jury properly instructed could find that the Applicant’s actions and her failure to act where warranted materially assisted or encouraged Mr. Vanier. Because I found that a reasonable jury properly instructed could find beyond a reasonable doubt that she knew the $20 million was missing and that the misrepresentation would be used to induce and encourage investors, the suggestion can be put to the jury that she did so either as a principal, or as one who aided or abetted Mr. Vanier in the commission of the offence, either with knowledge of or wilfully blind to the commission of the offence.

50If I am wrong and a reasonably instructed jury could only find that the Applicant was wilfully blind, the court in R. v. Roach, 2004 59974 (ON CA), [2004] O.J. No. 2566 (C.A.), held that deliberate ignorance or wilful blindness is the equivalent of actual knowledge. A party who aids or abets must have actual knowledge but such actual knowledge is defined as actual knowledge or deliberate ignorance which is the equivalent of actual knowledge. (R. v. F.W. Woolworth Co. Ltd. (1974), 1974 707 (ON CA), 3 O.R. (2d) 629 (C.A.))

Part IV. Conclusion

51I am reminded that the limited weighing of circumstantial evidence on an application for a directed verdict does not entitle me to draw factual inferences, assess credibility or ask whether I would find guilt was established. A judge’s role in reviewing an application for a directed verdict is simply to determine whether or not the evidence as a whole, if believed, could reasonably support an inference of guilt. In a case such as this, where the evidence is circumstantial, inferences may be drawn from known or assumed facts either by induction or deduction from known facts.

52The inferences to be drawn from circumstantial evidence need not be compelling or easily drawn and need not be probable inferences. Moreover, where there are competing inferences, such as those suggested by the Applicant, these are for the trier of fact to resolve as long as the inference suggested by the Crown is reasonable. The jury must then determine whether in their view, the inference drawn from circumstantial evidence is the only reasonable inference.

53In this case, as noted above, there is evidence that reasonably supports the inference suggested by the Crown. The Applicant suggests there is also evidence that gives rise to competing inferences. However, the place to assess those competing inferences is at trial: it is up to the jury to determine whether, on the basis of that evidence, they are satisfied beyond a reasonable doubt that the matter ought to be inferred.

54For the above reasons, the application for a directed verdict is dismissed.

Thorburn J.