Court File and Parties

Court File No.: 76/17 Date: 2019/03/06 Ontario Superior Court of Justice

Between: Her Majesty The Queen And: Michael Coutts and Sharon Coutts

Counsel: K. Dalrymple, for the Crown Self Represented (Michael Coutts) P. Douglas, for S. Coutts

Heard: January 21, 22, 23 and 24, 2019

Reasons for Judgment

A.J. Goodman J.

[1] Michael Coutts (“Michael”) and Sharon Coutts (“Sharon”) each face a series of fraud and theft related offences arising from their employment as co-property managers for Primevest Realty Corporation (“Primevest”).

[2] The date of the alleged offences is between March 1, 2009 and January 8, 2015. The apartment buildings are located at 2228 and 2230 Trafalgar Street in London.

[3] Both accused are jointly charged with possession of property obtained by crime over $5000, use, deal or act on a forged document, namely rent rolls as if genuine, fraud over $5000, and theft of money of a value exceeding $5000, all contrary to their respective provisions in the Criminal Code.

[4] Michael and Sharon pleaded not guilty to all of the allegations. Sharon is represented by counsel, Michael is self-represented.

[5] In support of the Crown’s case, various banking, financial and accounting documents were introduced into evidence, primarily in electronic format.

[6] The Crown tendered an Agreed Statement of Facts and called four witnesses. At the conclusion of the Crown’s case, I dismissed Michael’s motion for a directed verdict with brief reasons provided to the parties. Michael testified on his own behalf. Sharon chose not to call any evidence.

[7] After the evidence and submissions, I rendered my verdicts. I concluded that Michael was guilty of counts one, three and four, and not guilty of count two. Sharon was found guilty of count one, and was acquitted of all other counts. I advised the parties that my reasons would follow. These are my Reasons.

Positions of the Parties

[8] The Crown submits that the charges have been made out in relation to both accused. The Crown relies primarily on the rent rolls and ledgers, the banking records and other business records filed. The Crown also relies on the evidence admitted on consent in relation to the various tenants.

[9] All of these records indicate the fraud and theft of money and demonstrate a pattern of deceit in relation to their employer, Primevest, with corresponding depravation to the corporation. This conduct continued over the course of years with the full knowledge of both accused.

[10] The Crown submits that the prosecution evidence was unchallenged and the records speak for themselves. Michael’s testimony was fraught with external inconsistencies and was illogical and incapable of belief. The Crown contends, therefore, that both accused knew and participated in committing a fraud on Primevest. Both accused spent the tenants’ money to support their lifestyle, well beyond their means. Michael also provided false or misleading information on the rent rolls to hide the scheme to defraud the corporation. The Crown adds that with respect to Sharon, she was either a party to the conduct or wilfully blind to the fraud. Accordingly, they should be convicted of all counts.

[11] The position of the defence is that the evidence of Michael was credible and reliable. Michael submits that he did not commit fraud or theft. While he did not deny receiving the sums of money from the tenants and that evidence is not disputed, he submits that he provided all of the money that he collected from the tenants - whether in cash or by cheque - to Primevest. He properly accounted for the sums of money and completed the appropriate bank deposits and the rent rolls.

[12] Michael submits that as his computer was taken upon his termination, he was unable to properly defend himself and to rebut the prosecution’s evidence in relation to the charge of the forged rent rolls and fraud. He submits that it is possible that the evidence relied upon by the Crown may not be what he had inputted at the time he sent the various rent rolls to Primevest.

[13] Sharon asserts that there is no evidence that she was aware that there was any fraudulent activity or theft of rent money. While she may have received some of the rent money or deposits, this was turned over to Michael as he dealt with all of the financial dealings and transactions.

[14] Further the Crown has not established her culpability on the charge of possession of property obtained by crime based on the doctrine of wilful blindness. As this is a circumstantial case, Sharon submits that Michael and the evidence provides for plausible explanations for the deposits and withdrawals of money from her bank account. She had other income to support the payment of various expenses including her credit card.

[15] The defence submits that the Crown has failed to discharge its burden of proof and both accused should be acquitted of all counts.

Legal Principles

Possession of Property obtained by crime – s. 355(a) of the Code:

[16] This offence requires proof beyond a reasonable doubt that Michael and/or Sharon was in possession of money; that the money was obtained by or, derived from crime; that Michael and/or Sharon knew that the money had been obtained by or derived from crime and that the value of the money exceeded $5,000. The latter point is not at issue here.

[17] This is a specific intent offence. Knowingly means that Michael and/or Sharon was aware of the possession or custody of the money by another, or in another place, and does not act through ignorance, mistake or accident. Where any one of two or more persons, with the knowledge and agreement of the others, has anything in his/her possession or custody, all of them are in possession of that item, provided each has some control over the thing. Knowledge, agreement and some control by the others who are not in actual possession of the item is essential. Mere indifference or doing nothing is not enough. The Crown may prove knowledge and sustain a conviction if it can prove that an accused was wilfully blind.

Use, deal or act upon a forged document - s. 368(1) of the Code:

[18] This offence relates to the rent rolls. To sustain a conviction, it must be established beyond a reasonable doubt that the rent rolls were forged; that Michael and/or Sharon knew or believed that the rent rolls were forged and dealt with them and represented the contents therein as genuine.

[19] A forged document is a false document made by a person who knows it is false and who intends that it be dealt with as if it were genuine to the prejudice of another person. It does not matter where or by whom the document was forged. To “believe” something is to have confidence or faith in it and, as a result, to rely on it as true.

[20] The question is whether an accused actually knew or was aware that the rent roll was forged when s/he had it. An accused may personally deal with the rent rolls by using or acting upon it her/himself or dealing with it in some other way. To represent something as genuine means to describe or put it forward as authentic, the real thing, as what it appears to be, rather than what it really is and an accused knows or believes it to be. This count involves an intention on an accused’s part to deceive Primevest.

Fraud over $5000 - s. 380 of the Code:

[21] For this offence it must be established beyond a reasonable doubt that Michael and/or Sharon deprived Primevest of something of value, in this case rent money; that the accused’s deceit, falsehood or other fraudulent means caused the deprivation; and that Michael and/or Sharon intended to defraud Primevest and that the value of the monies involved exceeded $5,000. Again, there is no issue with respect to the value of the rent money.

[22] The concept of “deprivation” includes, but does not require that Primevest suffered actual economic loss. While Primevest’s economic or financial interests must be at risk, the corporation does not have to lose any money or anything of value as a result of Michael and/or Sharon’s conduct.

[23] The deprivation must be established by deceit, falsehood or other fraudulent means. “Deceit” is an untrue statement made by a person who knows that it is untrue, or has reason to believe that it is untrue, but makes it despite that risk, to induce another person to act on it, as if it were true to that other person’s detriment. “Falsehood” is a deliberate lie. “Other fraudulent means” includes any other means, which are regarded as dishonest according to the standards of reasonable people.

[24] In the case of R v. Olan, [1978] S.C.J. No. 57 Dickson J. (as he then was) set out the principles for fraud: “[T]he offence [of fraud] has two elements: a dishonest act and deprivation; the dishonest act is established by proof of deceit, falsehood or "other fraudulent means"; 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.

[25] The question of what “other fraudulent means” entails was canvassed by the Supreme Court in two companion cases, both released in 1993. In R. v. Theroux, [1993] 2 S.C.R. 5 at para 18, the court discussed the actus reas required for this third branch of the offence.

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 reas 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.

[26] At para. 24, the Supreme Court addressed the mens rea requirements:

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. To put it another way, following the traditional criminal law principle that the mental state necessary to the offence must be determined by reference to the external acts which constitute the actus of the offence (see Williams, supra, c. 3), the proper focus in determining the mens rea of fraud is to ask whether the accused intentionally committed the prohibited acts (deceit, falsehood, or other dishonest act) knowing or desiring the consequences proscribed by the offence (deprivation, including the risk of deprivation). The personal feeling of the accused about the morality or honesty of the act or its consequences is no more relevant to the analysis than is the accused's awareness that the particular acts undertaken constitute a criminal offence.

This applies as much to the third head of fraud, "other fraudulent means", as to lies and acts of deceit. Although other fraudulent means have been broadly defined as means which are "dishonest", it is not necessary that an accused personally consider these means to be dishonest in order that he or she be convicted of fraud for having undertaken them. The "dishonesty" of the means is relevant to the determination whether the conduct falls within the type of conduct caught by the offence of fraud; what reasonable people consider dishonest assists in the determination whether the actus reas of the offence can be made out on particular facts. That established, it need only be determined that an [page20] accused knowingly undertook the acts in question, aware that deprivation, or risk of deprivation, could follow as a likely consequence.

[27] The discussion in R. v. Zlatic, [1993] S.C.J. No. 43, followed along with much of the same principles as espoused by the Supreme Court in Theroux.

[28] As mentioned, the dishonest act is established by proof of the prohibited act, a deceit, falsehood or other fraudulent means. Such dishonest conduct may, depending on the circumstances, involve lies or misrepresentations of fact, deceitful acts, non-disclosure of important facts, cheating, exploiting the weakness of another, the use of funds for personal purposes said to be for a different purpose: Théroux at 456-7.

[29] The element of deprivation is established by proof of actual detriment, prejudice, or risk of prejudice to the economic interests of the alleged victim. In other words, deprivation may include merely placing another's money or property at risk: Théroux, at pp. 456-7, 459; Zlatic, at p. 480. In both Zlatic and Theroux, the definition of fraud was refined using a purposeful approach — one which shed formulaic requirements and looked to the heart of the matter.

[30] In Zlatic, the majority of the court affirmed its prior judgment in Olan, holding that fraud by “other fraudulent means” does not require deceit or falsehood. Rather, the actus reus element of fraud by “other fraudulent means” was defined objectively by reference to what a reasonable person would find dishonest. As mentioned in Zlatic at para 32, “The dishonesty of ‘other fraudulent means’ has, at its heart, the wrongful use of something in which another person has an interest, in such a manner that this other’s interest is extinguished or put at risk”. At para 29, McLachlin J. (as she then was), for the majority explicitly contemplated that the prohibited act and the prohibited consequence could exist as part of a continuing course of conduct.

[31] What is essential is not the formalities of profit or actual pecuniary loss, but that dishonest practices which subject the pecuniary interest of others to deprivation or the risk of deprivation be visited with the criminal sanction. The primary analytical focus is on whether there was a use of something which was contrary to what was represented or authorized. If it was, there is a “wrongful use” and therefore the prohibited act. The presence or absence of a dishonest intent at any time other than during the prohibited act is simply not required by the concurrence principle.

[32] Where the conduct is established, the accused is guilty whether he actually intended the prohibited consequence or was reckless as to whether it would occur. The accused must have subjective awareness, that his or her conduct will put the property or economic expectations of others at risk. In defining the limits of the mens rea element for fraud, appellate courts caution trial judges that mere negligent misrepresentation or improvident business conduct is excluded from or does not sustain criminal liability.

Theft over $5000- s. 334(a) of the Code:

[33] For this offence it must be established beyond a reasonable doubt that Michael and/or Sharon took something, in this case rent money, to his/her own use that belonged to Primevest; that the accused took Primevest’s rent money fraudulently and without colour of right; that when the accused took Primevest’s money, he or she meant to deprive Primevest of the rent money or the corporation’s interest in it, and that the value of the rent money was more than $5,000. Again, the value of the money is not in dispute.

[34] A person takes (converts) property “fraudulently and without colour of right” if they take the money intentionally, knowing that it was the property of another person, and knowing that they were not legally entitled to take it. A person means to deprive another of interest in property permanently if he or she takes the money with no intention of returning it to the owner. A person also means to deprive another of interest in property permanently if the person taking it sells it, or gives it away, or otherwise disposes of it or any interest in it to anyone other than the owner.

Analysis

[35] It is against this background that I now turn to the specific evidence and the analytical principles that I am required to apply in determining whether Sharon and/or Michael is/are guilty or not guilty of the charges s/he faces. All of the evidence must be considered in determining whether the Crown has made out the charges beyond a reasonable doubt. In this case, both accused are entitled to the benefit of the presumption of innocence and are not required to give any evidence. The defence was not required to prove that the offences occurred as alleged by the Crown and in the manner proposed by the prosecution.

[36] If the evidence of the Crown witnesses is accepted, I am required to determine that the events described, coupled with agreed statements of facts, and exhibits entered on consent would establish the presence of all of the required legal and factual elements of the charges against one or more of the accused. This case centres on the credibility of witnesses, albeit the business records and documents tend to speak for themselves. Of course, ledgers generated by prosecution witnesses can only enjoy sufficient weight if substantiated by other reliable source banking or business records. However, to establish whether findings of credibility are effectively dispositive of the matter, I cannot lose sight of the legal components of the charges and the essential elements that the Crown must prove beyond a reasonable doubt before one or both accused can be found guilty of the charges.

Reasonable Doubt:

[37] The Supreme Court of Canada has commented on the principle of proof beyond a reasonable doubt in several cases. In R. v. Lifchus (1997), 118 CCC 3d 24, Cory J. explained that the meeting of proof beyond a reasonable doubt is "[a] standard of proof is higher than… a balance of probabilities, yet less than proved with absolute certainty".

[38] The law provides for no burden of proof on the accused at any stage in the proceedings. The standard of proof in a criminal matter is the higher standard of proof; namely, beyond a reasonable doubt. A conclusion of probable or likely guilt requires that an acquittal be entered. Reasonable doubt cannot be based on sympathy or prejudice, but must be founded in reason and common sense and be logically connected to the evidence or the absence of evidence.

Assessing credibility:

[39] On the subject of assessing credibility, in a case such as this the framework for evaluation of the evidence and the credibility of the witnesses is the three-step method of analysis described by the Supreme Court of Canada in R. v. W.(D.), [1991] 1 S.C.R. 742. This seminal three-fold test is straightforward. First, if the trier believes the evidence of the accused, then the accused must be acquitted. However, even if I do not believe the accused’s testimony or the defence evidence, I would be obliged to dismiss the charge(s) if it leaves me in a position of reasonable doubt. Finally, even if I am not left in doubt by the evidence of the accused or the defence evidence, I am required to ask myself, having regard to the whole of the evidence presented at trial and on the basis of the evidence that I do accept, whether I am convinced beyond a reasonable doubt of the guilt of one or more of the accused.

[40] The assessment of credibility requires a determination of whether the witness’ recollections are accurate regardless of the sincerity of their beliefs.

[41] Ultimately, there are no fixed rules to which I can look to guide me in the assessment of the credibility of the witnesses but a number of elements may be considered. These include the perceptions of the witnesses, their memory, how reliably and accurately do they recall the events, the manner in which the witness’ perceptions have been communicated to the Court, and whether the information has been presented in a sincere, complete and truthful manner. I will look to the witnesses and assess whether they are being sincere and frank or biased, honest or careless with the truth, reticent or evasive in the evidence that they have provided.

[42] Inconsistencies in the evidence of witnesses on relatively minor matters or matters of detail are, of course, normal. However, where an inconsistency of a witness involves a material matter central to the elements of the alleged offences and about which common sense dictates that an honest witness is unlikely to be mistaken, the inconsistency can demonstrate carelessness with the truth that may undermine the whole of a witness’ evidence.

[43] As a trier of fact, I may believe all, none or some of a witness' evidence. I can accord different weight to different parts of the evidence that I do accept. At the end of the day, the best approach to the assessment of credibility is for me to ask myself as trier the same questions that we admonish juries to ask when we ask them to assess the credibility of witnesses, the reliability of witnesses, and to determine the truth.

Application of the evidence to the legal principles:

[44] I have taken into account the whole of the evidence when making these assessments, although I have not recounted all of that evidence in the course of undertaking that analysis in these reasons – I have instead drawn attention to that evidence and to those particular instances that form the central foundations for my findings.

Fraud over $5000:

[45] Dealing with the fraud count, in this case, the prosecution alleges that Michael and Sharon obtained specific sums of money from tenants by making certain representations under the guise of collecting rent or deposits from tenants. The accused did not forward these rent funds to the corporation as required by virtue of their employment and job requirements. The rent money belonged to Primevest and Michael and Sharon retained or converted these rent or other deposit funds for his or their own benefit and use.

[46] The evidence of the numerous tenants was entered on consent. I am satisfied that the ledger information related to these tenants provides an accurate depiction of the rent amounts due and owing and paid to the accused in one form or another. Numerous documents and banking records were filed on consent demonstrating that funds received by the Coutts’ did not make their way to Primevest.

[47] Segments of the Agreed Statement of Facts are as follows:

Lorraine Hardwick and her mother took possession of unit 101-2230 Trafalgar Street on April 1, 2014. The rent for this unit was set at $890.00. A $200 cash deposit was taken by Michael on January 22, 2014. The non-refundable deposit was not authorized. Hardwick provided first and last month’s rent (“1+LMR”) of $1680.00 to Michael on March 19, 2014 and received a receipt. On May 5, 2014, Hardwick attended the building managers unit and Michael took the $890 cash rent payment personally and provided a receipt for the transaction. The rent roll shows no deposit of April 2014 & last month’s rent miscalculation. Neither of 1+LMR was recorded in the rent roll for March or April 14. The rent roll shows no deposit of the May 2014 rent. Total loss of $2,770.

Dan Guse and Amber Windsor viewed apartment number 108-2228 Trafalgar Street in September 2014. Sharon showed the apartment and was given $200 as a down payment in cash. No receipt was provided. On September 29, 2014 these tenants met with Michael and provided 1+LMR minus the deposit in cash, $1590. They were given a receipt that reflected only the $1500 deposit and did not include the deposit of $200. After moving into apartment #108 each monthly rent payment was made in cash ($890.00) and placed inside an envelope with their name and apartment number and was deposited into Michael and Sharon’s apartment door slot, for “Rent Money”. Cash payments were made for November, December and January 2015. Neither the $200 cash received nor the rent for October or the last month’s rent was recorded in the rent roll. Total loss of $2,680.

On November 24, 2010 Nadine Wagstaff viewed apartment 112-2228 Trafalgar Street and placed a down payment of $200 cash with Michael. Once this tenant had enough for 1+LMR, she paid it in cash to Michael. She began making weekly cash payments to Michael on March 1, 2011. $1380 1+LMR in cash and cheques. At no time was the rent ever paid by a cheque nor were 2 months paid at the same time. The monthly rent for this unit was $790.00. The tenant paid regularly and was never notified of missed or non-payment of rent by either Sharon or Michael. Sharon took cash for one payment. March 2011 and last month’s rent was not recorded in rent roll. Apartment shown as vacant in March 2011. April 2011 to December 2011: $7,110 (9 x 790) cash payments to Michael. January 2012 to December 2012: $9480 (12 x $790) cash. January 2013 to December 2013: 9480 (12 x &790) cash. January 2014 to December 2014: $9480 (12 x $790) and January 2015: $790 Cash. Total loss of $36,340.

Kelly McCullogh signed a lease with Michael for unit 114-2228 Trafalgar in October 2010, taking possession on November 1, 2010. The rent for this unit was $790.00 each month. She paid cash directly to Michael or Sharon each month. At no time was the rent for this unit paid by cheque. At the end of the year, Michael provided a yearly rent receipt for each year 2011, 2012 and 2013 for $948.00 directly to the tenant indicating to her she had paid rent in full for that year. November 2010 to December 2014: $790 x 50 = $39,500. No cash deposits made in favour of Primevest. Total loss of $39,500.

Wendy and Matt Brisseau moved into unit 115-2228 Trafalgar Street commencing September 1, 2013. The rent for this unit was $790 each month. They provided a $200 cash deposit to Michael on July 11, 2013 and received a receipt. The 1+LMR were provided and reflected on September 2013 rent rolls. The Brisseaus’ paid by cheque each month except for April 2014 when cash was paid directly to Michael. July 11, 2013: $200 cash was taken by Michael on July 11, 2013. 1+LMR on rent roll for September 2013 and shows a cheque for $1,580. April 2014: Tenant paid $790 cash and it was not paid into their rent account for April 2014. Total loss of $990.00.

Kassandra Robbins moved into unit 220-2228 Trafalgar Street commencing May 1, 2013. The rent for this unit was $690.00 each month. 1+LMR and $200 deposit was paid in cash directly to Michael with no receipt provided. May 2013: 1+LMR of $1380 cash not recorded in the rent roll. The tenant moved in the month of May but the rent roll shows that they moved in the month of June. June and July 2013: Rent for both months paid in cash but not recorded in the rent roll. March to December 2014: Cash for 10 months’ rent was not recorded in the rent roll. January 2015: Cash rent $690 was not recorded in the rent roll. Total loss of $6900.

Brad and Deneen Handley moved into the apartment at 306-2228 Trafalgar Street on February 1, 2014. The rent for the unit was $790. They had given a $200 cash deposit to Michael for the apartment and upon moving in they provided 1+LMR to Michael in cash. For this they received a receipt reflecting the rent minus the deposit. Each month thereafter the Handleys’ provided cash payments to Michael and Sharon in a sealed envelope with their name and apartment number on it. A total of $1580 was recorded as a cheque but the tenant gave Michael cash. March, May to July, September to December of 2014: $790 x 8 = $6,320. The $6,320 cash that was left was not applied to this unit and does not appear in the bank deposits. Total loss of $6320.

Alan Grace took possession of unit 115-2230 Trafalgar Street on March 1, 2013. He paid 1+LMR and moved in. All cash for rent was given to Michael at his apartment or the cash was deposited into the rent slot of Michael and Sharon’s apartment. February 2013: Cash was given to Michael and it was later recorded in March 2013 as a cheque for $690 for 1+LMR. $690 cash not deposited. 13 months: 2013 - June, July and August 2014 – January, March, April, May, July, August, September, October, November and December: 13 x $690 cash = $8,970. Rent not recorded in the rent roll.

Sara Carruthers and Mark Wells provided a $200.00 cash deposit on December 17, 2013 to Michael who provided a receipt. Once approved for 202-2230 Trafalgar Street, the tenants provided 1+LMR of $1580.00 in cash to Michael. The monthly rent for this unit was $890.00. These tenants took possession and moved into the unit on January 1, 2014. Each month’s cash was paid on or prior to the 1st of the month directly to Michael. January 2014 (only added to rent roll in July 2014): $1380 cash given for the balance of 1+LMR. Receipt given for $1580 but not added to the rent roll until July 2014. 1+LMR was recorded in August 2014. 12 months x $890 = $10,680 was not added to the rent roll until July 2014. The deposits of cash provided to Michael was not recorded in the rent roll. Total loss of $10,680.

Gerald Morin viewed the apartments at 2228 Trafalgar Street in October 2013. In October 2013, he provided a $200.00 cash deposit on unit 203 directly to Michael. On November 5, 2013 he paid the 1+LMR directly to Michael by cheque. Each month the tenant paid by cheque either directly to Michael or in the rent slot of Michael’s door.

On February 25, 2014 Ashley Fortey and Dylan Roe signed a lease agreement for unit 223-2230 Trafalgar Street. Tenants were told rent was $890 but in fact it was $790 and they were told to pay in cash. They provided 1+LMR minus the $200 security deposit in cash directly to Michael. After moving into the unit on March 1, 2014 all rent was paid in cash and was placed in an envelope and was dropped into Michael and Sharon’s mail slot. February 25, 2014: $200 cash deposit. Total rent was $1780 cash for 1+LMR – not recorded and not added to the rent roll until July 2014. $1780 cash not deposited. 2014 April, May, June: 3 x $890. Not in rent roll but rent taken. $2670 cash not deposited. 6 months – July to December 2014: 6 x $890 = $5340. In rent roll but rent not given to this unit. $5340 not deposited. Total loss $9,990.

On July 22, 2014 Leanne Baumgarten made a deposit for unit 312-2230 Trafalgar Street. Michael received a $200 cash deposit and provided a receipt to the tenant. On July 29, 2014 the 1+LMR of $1580 (minus the deposit) was handed directly to Michael by the tenant who moved in August 1, 2014. Each month $890.00 was provided in cash directly to Michael and he provided rent receipts. Michael said debit wasn’t available and he preferred cash. July 29, 2014: This was not recorded in the rent roll or credited to the tenants. $1580.00. September to December 2014: 4 x $890. 3 months’ rent was given to the Coutts in cash but not recorded in the rent rolls. Total loss of $3560.

Courtney Heaman moved into unit 325-2228 Trafalgar Street in September 2011. She was shown by the Coutts as being on the rent roll and moving in October 1, 2011. Heaman provided 1+LMR to Sharon. The rent for this unit was $690.00 per month.

Ryan Berger moved into unit 211-2230 Trafalgar Street in October 2012. He paid a $200 deposit on the unit in September 2012 directly to Michael. On signing the lease, 1+LMR was provided in cash directly to Michael. Each month thereafter $790.00 was provided directly to Michael or placed in the rent slot of Michael’s unit. September 2012: $200 cash deposit. $1580 cash was not recorded in the rent roll. $1580. 10 months: 2012 – October, November, December 2013 – June, July, September, November 2014 – January, March, April. 10 x $790 = $7900. The $7900 cash was not recorded in the rent roll.

Rod Woof took possession of unit 122-2228 Trafalgar Street in August 2012. A cash deposit of $200 was paid directly to Michael in July 2012 as was the 1+LMR. The rent for this unit was $790.00 per month. July 2012: $200 cash. Rent roll indicated that the move-in date was September 2012 and the rent paid by this tenant was not recorded in the rent roll.

In November 2009, Christa Fisher moved into unit 106-2228 Trafalgar Street. The rent for this unit is $790.00 per month. The tenant provided the 1+LMR and paid all subsequent months’ rent by cheque.

In August 2013, Scott and Darlene Powers paid a $200 deposit to Michael in cash. This was for unit 116-2228 Trafalgar St. The rent for this unit was $790.00 per month. September 12, 2013: Balance of 1+LMR paid by draft, as was each and every month thereafter and not properly recorded in the rent roll.

In May of 2013 Donna and Robert McCaffrey provided a $200 cash down payment directly to Michael for unit 226-2230 Trafalgar Street.

[48] This case is relatively straightforward. As mentioned, I accept the prosecution evidence without reservation or hesitation. The witnesses were not challenged in cross-examination. Further, the tenants’ evidence and documents obtained from the production orders, with the ledgers and the various cheques and other financial documents speak for themselves.

[49] I accept the evidence from Mr. Hiraji, Mr. Viyani and Ms. Saul without reservation. Primevest had certain policies and practices that was well understood by the defendants. It makes immanent sense. No cash was permitted. Payments from tenants had to be in cheque or bank draft form. There was no obligation to collect any deposit monies for rental units.

[50] I also accept Officer Lycett’s evidence and the references to banking and credit card documents, but have limited any weight of her testimony to the areas that she could address without being qualified as an expert witness.

[51] The agreed statement of facts coupled with the ledgers and accounting records clearly establishes that Michael and Sharon obtained sums of money from the tenants through their employment as representatives of Primevest. It is clear to me, even on Michael’s own evidence, that he was obliged and required to account for the rental monies received and that he was the principal employee for this activity.

[52] As established by the tenants’ evidence and ledgers, I accept that certain money provided to Michael or Sharon in cash did not flow to Primevest. The rent rolls and other documents demonstrate misleading representations to Primevest as to the status of various rental units and diverting or listing rent funds to cover off other deficiencies in the rent rolls. Further, certain rental sums that had been indicated on the rent rolls was misrepresented and/or did not make their way to the corporation as due and owing. Rather, these funds were diverted to the Coutts’ for their own benefit.

[53] The evidence is replete with instances wherein Michael demanded $200 cash deposits from prospective tenants, sums that were neither authorized nor forwarded to Primevest. Indeed, in his testimony, Michael did not dispute the tenants’ evidence about certain representations that he made to them or that he received the sums of money indicated by those tenants. Michael attempted to provide explanations and excuses about the impugned rental monies received and the rent rolls that were produced and sent to Primevest every month. He attempted to deflect any blame or misunderstanding to other factors, such as changes of personnel at corporate office, or that he had prior permission to receive cash or act in the manner that he did, or that all of the sums of money were accounted for; cash was properly recorded and deposited in the bank or sent to the credit of his employer, or the rent rolls were in order and that there were no deficiencies.

[54] I do not find Michael’s evidence to be credible or trustworthy. During his testimony, Michael tended to be evasive. Further, his explanations are self-serving and illogical. For example, Michael’s suggestion that he was authorized and thereby routinely sent large sums of cash to Primevest by Purolator courier is ludicrous. I reject Michael’s evidence that he did not know of any company policy of non-acceptance of cash payments; that the cash was actually deposited or sent and must be lost or otherwise not properly recorded by Primevest or that he had followed direction for all of his actions contrary to company policy related to tenants’ funds and deposits. His explanations about failing to address the concerns raised by the corporation prior to his termination regarding discrepancies in rental monies received is not credible. His delay in dealing with eviction notices from corporate office speak to his knowledge that he knew his scheme could not withstand further scrutiny by corporate office.

[55] Although there is no onus on an accused to adduce any evidence whatsoever and ever mindful not to shift the burden of proof, there is no corroboration other than his bald assertions and vague attribution to other sources of funds. Michael did not have one scintilla of evidence to support any of his claims. He did not provide receipts, documentation or any substantiation whatsoever, even one courier invoice.

[56] While Sharon did receive the occasional rent envelope or cash from the tenants, or resided in the same apartment where deposits were made, I accept the evidence from the prosecution witnesses that it was Michael who handled the accounting and the rent rolls, and was responsible for the rent receipts, deposits and reporting to Primevest.

[57] As mentioned, the conception of fraud looks to the heart of the matter, and asks a simple question — whether there was a “wrongful use of something,” a use which is objectively dishonest and which caused a loss or risk of loss to a pecuniary interest. If so, and if there is found to be the necessary concurrence of mens rea and actus rea elements, the offence of fraud is made out, in a purposeful way. Such is the case here.

[58] As mentioned, Michael’s evidence does not raise a reasonable doubt on the issue of mens rea. I have no doubt that he perpetrated and acted upon the fraud as the principal employee dealing with the rent rolls, collecting the rents and accounting for them. Further, I accept that he was the responsible person for all of the reporting to Primevest. As such, he made fraudulent and misleading representations with diversion of rent funds to his benefit. This action eventually lead to notices of eviction being sent to tenants who actually paid their rent.

[59] Sharon was hired by Primevest as a co-manager with shared responsibilities. It is likely and probable that she acted as a party to the fraud. However, there is insufficient evidence to satisfy me that Sharon acted in a manner to defraud the corporation. I accept that it was Michael who handled all of the transactions or was responsible for the financial transactions as co-manager of the properties. I am not satisfied that this charge has been made out against her.

[60] Given that the $200 deposits requested and received by Michael were not monies that were entitled to be received by Primevest, Michael committed fraud, but in this respect against the individual tenants. As such, the amount of the loss to Primevest is somewhat reduced.

Theft:

[61] Similar evidence applies here as in relation to the fraud count. I find that Michael stole or took rent money that did not belong to him without colour of right. Those funds were due and owing to his employer, Primevest. Without repeating the evidence, the actus reus and mens rea elements of the offence have been made out.

[62] A finding of guilt is supported on the basis that Michaels’s unauthorized and surreptitious use of the corporation’s rent monies due used for personal gain was a breach of his employment obligations. This benefit, amounted to an objectively dishonest, wrongful use; and that this wrongful use caused an actual loss or a risk of loss to Primevest’s pecuniary interest; and that the Michael was subjectively aware of the facts which amounted to the prohibited act, and that he had knowledge or was recklessness towards the loss or risk of loss caused by the wrongful use. Michael diverted cash and other monies due and owing to the corporation for his own use and the benefit of Susan.

[63] I accept that Michael was the principal party and that Sharon’s role in the theft of rent or other money was merely as a conduit. I am not satisfied beyond a reasonable doubt as to her culpability for this offence.

Use, utter or act upon forged documents – rent rolls:

[64] As mentioned, I reject all of Michael’s evidence about alleged conversations he had with representatives of Primevest permitting cash payments, rent deposits, repair invoices, forwarding cash by mail, deposit slips being missing or anything else that relates to the rent rolls or relevant records.

[65] I find that it is probable that Michael forged documents including the rent rolls in order to hide money due and owing to Primevest. He also manipulated records for certain months directed to the wrong unit when such was not the case or failed to record rents at all. Further, as the person responsible for the updating of the rent roll, he manipulated the amounts therein to other tenants and falsified documents that he was obligated to provide to his employer.

[66] Michael’s computer was taken away and he was unable to fully address the accuracy of the records held on this device including his input of data or numbers related to the rent rolls that he sent to Primevest. There was also some uncertainty or questions arising from Mr. Viyani’s testimony in relation to some of the rent roll documents reviewed by his department.

[67] That being said, it does not take away from the fact that Michael made false representations to Primevest throughout the relevant timeframe that deprived the corporation to accurate reporting and rent money due and owing to them. Michael also made false representations to the tenants and he nonetheless failed to record these deposit amounts on the rent rolls. This evidence goes to his state of mind and rebuts any claim of innocent activity, permission being granted, or any argument of negligent bookkeeping. However, I am giving Michael the benefit of the doubt on this count.

Possession of property obtained by crime:

[68] Section 354(1)(a) of the Criminal Code states: Everyone commits an offence who has in his possession any property or thing or any proceeds of any property or thing knowing that all or part of the property or thing or of the proceeds was obtained by or derived directly or indirectly from the commission in Canada of an offence punishable by indictment.

[69] Possession requires proof of knowledge and control. The evidence of knowledge and control may be either direct or circumstantial.

[70] Having rejected Michael’s version regarding the impugned funds, it is clear to me that Michael not only committed theft, but that he had actual knowledge and possession of the funds for his own use or to purchase items for Sharon’s benefit. The evidence presented at trial is overwhelming in this regard.

[71] A question is whether Sharon was aware of the need to make an inquiry about the origins of the money, but deliberately failed to do so because she did not want to know the truth about it. A court can properly find wilful blindness only where it can almost be said that the defendant actually knew, he suspected the fact, he realized its probability; but he refrained from obtaining the final confirmation because he wanted to be able to deny knowledge.

[72] The Supreme Court of Canada dealt with wilful blindness in R. v. Briscoe, 2010 SCC 13, [2010] 1 S.C.R. 411. At paras. 21 and 24 the court stated:

Wilful blindness does not define the mens rea required for particular offences. Rather, it can substitute for actual knowledge whenever knowledge is a component of the mens rea. The doctrine of wilful blindness imputes knowledge to an accused whose suspicion is aroused to the point where he or she sees the need for further inquiries, but deliberatively chooses not to make those inquiries. See Sansregret v. The Queen, [1985] 1 S.C.R. 570, and R. v. Jorgensen, [1995] 4 S.C.R. 55. As Sopinka J. succinctly put it in Jorgensen at paragraph 103, "[a] finding of wilful blindness involves an affirmative answer to the question: Did the accused shut his eyes because he knew or strongly suspected that looking would fix him with knowledge?"

Professor Don Stuart makes the useful observation that the expression "deliberate ignorance" seems more descriptive that "wilful blindness", as it connotes "an actual process of suppressing a suspicion." Properly understood in this way, the concept of wilful blindness is of narrow scope and involves no departure from the subjective focus of the workings of the accused's mind." (Canadian Criminal Law: A Treatise (5th ed. 2007), at p. 241). While a failure to inquire may be evidence of reckless or criminal negligence, as for example, where a failure to inquire is a marked departure form the conduct expected of a reasonable person, wilful blindness is not simply a failure to inquire but, to repeat Professor Stuart's words, "deliberate ignorance."

[73] In Sansregret v. The Queen, [1985] 1 S.C.R. 570. At para. 22, the court considered the distinction between recklessness and wilful blindness:

Wilful blindness is distinct from recklessness because, while recklessness involves knowledge of a danger or risk and persistence in a course of conduct which creates a risk that the prohibited result will occur, wilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant. The culpability in recklessness is justified by consciousness of the risk and by proceeding in the face of it, while in wilful blindness it is justified by the accused's fault in deliberately failing to inquire when he knows there is reason for inquiry.

[74] In R. v. Downey, [2016] O.J. No. 6855, S.K. Campbell J. had the opportunity to review the relevant jurisprudence and ably sets out the relevant principles for wilful blindness. The trial judge’s decision was affirmed by the Court of Appeal (2017 ONCA 789, [2017] O.J. No. 5271). At paras. 4-5, the court explained: Wilful blindness acts as a substitute for actual knowledge, when knowledge is a component of mens rea. As Charron J. put stated in R. v. Briscoe, 2010 SCC 13, [2010] 1 S.C.R. 411, at para. 21:

Wilful blindness does not define the mens rea required for particular offences. Rather, it can substitute for actual knowledge whenever knowledge is a component of the mens rea. The doctrine of wilful blindness imputes knowledge to an accused whose suspicion is aroused to the point where he or she sees the need for further inquiries, but deliberately chooses not to make those inquiries. [Emphasis in original.]

[75] In R. v. De Rojas, 2012 ONSC 3227, wherein Hill J. relied on R. v. Lincoln, 2012 ONCA 542; R. v. Aiello; and R. v. Pham (2005), 77 O.R.(3d) 401, aff'd 2006 SCC 26, [2006] 1 S.C.R. 940, at para. 95 the court stated:

Guilty knowledge may be established by proof that the accused had actual knowledge. However, depending on the circumstances, guilty knowledge may be imputed to an accused who, having a reason to suspect that a certain state of affairs existed, and "see[ing] the need for further inquiries" deliberately declined to make those further inquiries necessary to confirm or refute that state of affairs preferring instead to remain ignorant of the truth. Criminal intent includes wilful blindness...

A determination as to whether wilful blindness existed, as an equivalent of actual knowledge, (must be made in light of all the circumstances) including, for example, the accused being aware of inherently suspicious events with details that were unclear and defied common sense.

As stated in Jorgensen, at para. 103 "[a] finding of wilful blindness involves an affirmative answer to the question: Did the accused shut his [her] eyes because he[she] knew or strongly suspected that looking would fix, him [her] with knowledge?" There must be a real suspicion causing the need for further inquiry.

Wilful blindness is distinguishable from recklessness: Briscoe, at para. 22-3. Recklessness involves knowledge of a danger risk and persistence in the course of conduct which creates a risk that the prohibited result will occur: R. v. Sansregret, [1985] 1 S.C.R. 570 at p. 584. Recklessness can override the defence of mistake of fact (Sansregret, at p. 235) and, where knowledge is an element of the crime charged, recklessness cannot satisfy proof of the knowledge element: Sandhu, at p. 497.

[76] In R. v. Duong (1998), 39 O.R. (3d) 161 (C.A.) the court summarized the law of wilful blindness at para. 223:

These authorities make it clear that where the Crown proves the existence of a fact in issue and knowledge of that fact is a component of the fault requirement of the crime charged, wilful blindness as to the existence of that fact is sufficient to establish a culpable state of mind. Liability based on wilful blindness is subjective. Wilful blindness refers to a state of mind which is aptly described as "deliberate ignorance" (Stuart, Canadian Criminal Law, 3rd ed.(1995)at p. 209) Actual suspicion, combined with a conscious decision not to make inquiries which could confirm the suspicion, is equated in the eyes of the criminal law with actual knowledge. Both are subjective and both are sufficiently blameworthy to justify the imposition of criminal liability.

[77] Wilful blindness involves a state of what has been described as "deliberate ignorance" that involves "an actual process of suppressing suspicion". It does not involve a failure to inquire, but an active decision not to inquire so as to avoid being fixed with knowledge: Briscoe, at para. 24.

[78] In R. v. Vinokurov, 2001 ABCA 113, [2001] A.J. No. 612, the court explained that in regards to s. 354(1), the reasonable person standard will not satisfy the mens rea requirement. At paras. 8 and 9, the court stated: “It is well established in criminal law that wilful blindness will fulfil a mens rea requirement”.

[79] The Crown argues that the misrepresentations coupled with the actions of the Coutts’ to immediately or thereafter in the future use the funds for personal use is demonstrated by the purchases reflected in the Capital One credit card purchases. I agree. The evidence provided by the prosecution establishes beyond a reasonable doubt that Michael and Sharon used the funds to pay off debt obligations and purchases to sustain their lifestyle that they were not entitled to by virtue of their employment or income from other sources.

[80] I do not accept that the enhanced amount of funds deposited in his or Sharon’s bank account statements - over and above salary - flowed from cleaning jobs, from Sharon’s mother’s estate or from other sources. There were vague references albeit no independent evidence regarding Michael’s assertions of any other income or payments flowing to him or to Sharon by legitimate means; the selling of collectables, vehicles or trailers, or sources of income from cleaning, inheritances or anything else whatsoever. Even if there were some income derived from cleaning, the amounts earned would not even come close to the sums being deposited into Sharon’s bank account.

[81] Based on the banking documents filed along with the credit card statements, I am not left with a reasonable doubt as to Sharon’s culpability. She benefited from inordinate deposits of monies into her bank account from Michael, which in turn, she used for personal gain. I have no doubt that these sums reflected in the various banking records were not salary or other legitimate income or derived from other bonafide sources. However, ever mindful of the onus, I accept that funds coming into her account or the BMO MasterCard were temporally linked to funds taken from tenants or derived from the fraud or theft perpetrated against Primevest by Michael and provided to Sharon. Further, these funds went into her account and were immediately used to pay off escalating expenses due to debt and other charges.

[82] I also accept that Sharon had use and possession of these monies. The temporal connection is established. The banking records clearly show a pattern of behaviour and the flow of money coming from her bank accounts and used to sustain her enhanced lifestyle or for purchase and expenses paid for with her credit card concomitantly when these debts were due and owing.

[83] In sum, I find that Sharon had full knowledge that funds coming into the bank accounts to pay off her expenses at her income level was from money obtained by crime. If I am in error, I accept that Sharon shut her eyes because she strongly suspected that looking into the matter would fix her with knowledge. Wilful blindness is established by Sharon’s fault in deliberately failing to inquire when she knows there is reason for inquiry.

Conclusion:

[84] I am satisfied beyond a reasonable doubt that the Crown has established fraud, theft and possession of property obtained by crime as they relate to Michael’s culpability.

[85] Michael knowingly undertook the conduct which constitutes the dishonest acts, and subjectively appreciated that the consequences of such conduct could result in causing the corporation to lose its pecuniary interest in the rental funds due and owing, or in placing that interest at risk. I am satisfied that there is an element of dishonesty at the relevant time which to some significant extent caused the deprivation to the corporation. Michael also meant to deprive Primevest by taking monies with no intention of returning it to the owner. On the totality of the evidence, I am satisfied beyond a reasonable doubt that Michael possessed the necessary mens rea for the offences with which he is charged. Even if Sharon was acting as a party or was complicit, I am not satisfied of her culpability beyond a reasonable doubt.

[86] When I discount the cash rent deposits, and based on the ledgers and financial documentation, I am satisfied that the fraud resulted in a loss to Primevest of $148,730.00.

[87] While I have suspicions that it is likely or probable that Michael acted or used the rent rolls to mislead Primevest as to the rental situation with the various units and amounts of money provided by the tenants, I am not satisfied beyond a reasonable doubt that the prosecution has met its onus. Nonetheless, this does not obviate from the fact that Michael committed fraud and theft on the corporation by making false or misleading representations and diverting funds to his own or Sharon’s purposes.

[88] With regards to the count of possession of property obtained by crime, I find that both accused were knowingly aware that the sums of money were obtained illegally and used for their own personal benefit. With respect to Sharon, I impute knowledge to her of the sizeable sums of cash flowing into her bank account and then to pay off her Capital One credit card.

[89] In the alternative, I am satisfied beyond a reasonable doubt that Sharon had her suspicion aroused to the point that she thought there was a need for inquiry, but she deliberately chose not to inquire because she did not want to know the truth. Therefore, the Crown has met its onus in establishing wilful blindness.

[90] For all of these reasons, I find Michael Coutts guilty of counts 1, 3, and 4 and not guilty of count 2. I find Sharon Coutts guilty of count 1, and not guilty of all other counts. Convictions have been registered accordingly.

Justice A. J. Goodman Released: March 6, 2019