Basic Definitions of “Fraud”
The definition of “fraud” encompasses the action of false misrepresentation to deprive someone else of their property. Essentially, fraud involves stealing someone else’s property through deception. There are many instances of fraud. Common examples of fraud can include:
- Credit Card fraud
- Identity theft fraud
- Insurance fraud
- Tax fraud
In Canada, section 380 of the Canadian Criminal Code governs the general scope of fraud. There are other sections within the Criminal Code that deals with fraud in different contexts. The legislation defines fraud under section 380(1) as anyone who by deceit, falsehood, or other fraudulent means to defraud the public or any person of any property. Therefore, anyone who intends to cheat the other person out of their own property or money through deceit or misrepresentation would fall under the scope of fraud.
Checklist of Proving “Fraud”
In order to establish fraud, the prosecution must establish that the accused has satisfied a checklist relating to fraud. This includes establishing the Actus Reus, which means the action itself must relate to fraud; the Mens Rea, meaning that the accused intends to commit his action; and Causation, meaning that the deprivation of the victim’s property is a direct result from the accused’s fraudulent actions.
Actus Reus of Fraud
Simply put, Actus Reus means the physical portion of the crime. In the context of fraud, the accused’s action is “dishonest”, and it “deprives” the victim’s property. In simple terms, this means that the fraudster’s actions simply be dishonest and that the action would result to taking away the victim’s property. This physical portion of the crime is determined entirely objectively. If the accused’s actions are construed to be objectively dishonest and their actions take away the victim’s property, then the court would be satisfied the accused has satisfied the Actus Reus according to the Canadian Supreme Court case of R v Théroux [1993] 2 SCR 5.
There are many examples of fraud that satisfy the courts’ definition of Actus Reus. Below lists out a non-exhaustive list that common fraudsters use in various different common scenarios.
- For Credit Card fraud: The fraudster can forge documents when applying for a credit card. The fraudster can also be using a forged or altered credit card. Credit card fraud, in particular, is also covered under section 342 of the Criminal Code.
- For Identity Theft fraud: The fraudster can misrepresent his identity to obtain unjust benefits from others. Identity theft is also covered under section 402 of the Criminal Code. In particular, the impersonification of identity needs to have a possibility of an unjust benefit at the victim’s expense. An example of identity theft fraud can be found in the BC Court of Appeal case of R v Mastronardi [2014] BCCA 302 where the fraudster had misrepresented his personal circumstances in online dating to develop a personal relationship with the victim to obtain cash and credit at the victim’s expense.
- For Insurance fraud: The fraudster can make a false or exaggerated claim at the expense of the insurance company. This includes filing false documents to obtain insurance proceeds, as in the case of the BC Supreme Court case of R v Revington [2001] BCSC 683.
- For Tax fraud: The fraudster can commit this offence by not reporting all his income, or by fraudulently claiming tax expenses or credits. The fraudster can also falsely report his tax circumstances to qualify for government-funded social benefits as well. Tax fraud is also governed under subsection 239(1) of the Canada Tax Act.
The aforementioned has listed the Actus Reus of common types of fraud non-exhaustively in different contexts. It is important to note that this is not a defined list, and the wording of section 380 when governing the scope of fraud includes “other fraudulent means” not listed in statute to give authorities a leeway on classifying the perpetrator’s dishonest actions. If you are unsure whether your actions be classified as “fraud” or are facing criminal fraud charges, don’t hesitate to contact us to properly understand the scope of your offence.
Mens Rea of Fraud
Whilst Actus Reus is important to determine the existence of fraud, proving only the Actus Reus portion is not enough. Mens Rea means, in general terms, the state of mind during the perpetration of the crime. In the context of fraud, this entails that the accused needs to be subjectively aware of their actions are deceptive or fraudulent and that they are aware that their actions could lead to the loss of their victim’s property. The Canadian Supreme Court case of R v Théroux [1993] had elaborated on the mental state of this offence. In particular, the Court states that moral consideration should not be considered in determining the scope of Mens Rea. That means, even if the accused thinks that their actions are morally wrong and that they did not intend to deprive their victim of their property if there is simply a risk of deprivation, would be sufficient to proving the Mens Rea element of fraud.
The broad interpretation of Mens Rea can also be seen in another Canadian Supreme Court case of R v Emms [2012] 3 S.C.R. 810. In perpetrating the fraud, the Court had held that the accused had satisfied the Mens Rea element even if he had hoped the deprivation would not take place. Therefore, it is sufficient to say that awareness of deception and an awareness of the possibility of deprivation would satisfy the courts’ interpretation of the Mens Rea. This includes mistaken belief. For instance, the courts had rejected the idea of a mistaken belief of the law could negate the finding of Mens Rea in the Ontario Court of Appeal case of R v Must [2011] ONCA 390. In that case, the accused had mistakenly believed that the victim had owed him money, therefore he had forged the victim’s signature to receive payments. This does not negate the finding of Mens Rea because the Court had already established that the accused was already aware of his actions could lead to the victim’s loss of money. Hence, an honest mistake of the law is irrelevant.
Given the courts’ broad interpretation for establishing Mens Rea, fraudsters would have a hard time to prove that they are not aware of their deceptive actions would lead to their victim’s losses. As aforementioned, fraudsters cannot mistake that their actions are legal, and that they had not intended to cause loss to the victim’s property. Fraudsters also cannot turn a blind eye when conducting their actions as well. The Alberta Provincial Court of R v Bailey (2014) 589 AR 212 had clarified that ignorance to avoid making inquiries to the actions and consequences of the accused’s actions when they are aware that there could be a deception to deprive someone of their property would satisfy the courts’ interpretation of Mens Rea.
In the context of fraud occurring in a workplace, the prosecution would still require to satisfy that the accused is subjectively aware that their actions are deceptive and such actions would lead to the loss of property at the employer or client’s expense. With that being said, mere business failure alone cannot trigger the grounds for a fraud investigation, and that the aforementioned factors would need to be satisfied in order to proceed.
Causation
After going over the Actus Reus and Mens Rea, the prosecution would have to review whether the accused has satisfied the causation test. Simply put, causation in criminal law means that the accused actions must result to the charged offence. In the context of fraud, it means that the victim’s loss of property is a direct result from the accused actions.
The Ontario Court of Appeal in R v Winning (1973) 12 CCC 449, provides an example of causation in the context of fraud, the prosecution should also prove that the victim’s loss of property must result directly from the accused’s dishonest actions. That means in credit card fraud as was in the case of R v Winning, the victim can only rely on the accused’s fraudulent information which results to monetary loss to secure a conviction. In a credit card application, where the fraudster had used their genuine name and address to obtain credit but had fraudulently provided other information, the credit company must use the fraudulent information to satisfy the courts’ causation requirements.
Sentencing Principles
As already outlined, there are many different types of criminal fraud that requires a variety of sentencing principles. As a general scope, the overview provided beneath covers the general sentencing principles for fraud under section 380 of the Criminal Code. For the specific offences outlined above had other sections covering those specific sentencing principles. Despite this, Canadian courts would routinely refer to section 380 of the Criminal Code when considering general sentencing guidelines for the offender.
Section 380 of the Criminal Code separates sentencing of criminal fraud on a $5000 threshold.
If the value defrauded is under $5000, the courts would have a discretion to consider this as an indictable or summary offence, which determines the severity of the punishment. Should the offence be a summary offence then, then the fine cannot exceed $5000, imprisonment can only be for a maximum of 6 months, or both. Should the offence be an indictable offence under $5000, the terms of imprisonment cannot exceed 2 years.
If the value defrauded is over $5000, then it is an indictable offence. Sentencing principles for indictable offences for value defrauded over $5000 include imprisonment not exceeding 14 years.
There are other sentencing principles governing the courts’ approach to sentencing offenders. This includes aggravating and mitigating factors. Aggravating and mitigating factors, as the words suggest, various contexts and factors that would persuade the court to arrive at a higher or lower sentence respectively.
Aggravating factors can include the following:
- Abuse of trust involving employment or public office;
- Fraud by persons in position of trust, for example fraud on clients;
- Multiple offences in conjunction to the current criminal fraud offence;
Mitigating factors can include the following:
- The offender pleads guilty at the earliest possible instance;
- Giving evidence for the prosecution;
- Informing the police about their actions;
- Positive good character. An example of positive good character would be giving back to the community through unpaid community work.
The Rights of the Accused Pending Prosecution
When charged with a criminal offence relating to fraud, one common mistake is looking over your rights as the accused. The Canadian Charter of Rights and Freedoms (“Charter”), protects the basic rights and freedoms to all people in Canada. This includes the accused. The section of the Charter relevant in the context of the accused waiting for prosecution would be section 11(b). Section 11(b) covers, “anyone charged with a crime a right to be heard within a reasonable time”. That means should there be an unreasonable delay, the accused can file an infringement of their rights to have their case not being prosecuted.
For years, Canadians have voiced their dissatisfaction concerning the huge backlog of cases and the lack of speed from courts undermining their access to justice. Then Canadian Senator George Baker had noted the culture of complacency in Canadian courts could mean an unreasonable delay of time. Adding on the courts’ complacency to the already complex nature of fraud investigations involving long periods of time undermines the accused’s rights of being heard within a reasonable amount of time. The Supreme Court of Canada in the case of R v Jordan [2016] 1 S.C.R. 631, had dramatically changed the Canadian legal landscape by setting up an upper limit for cases to be heard.
Unless the prosecution can show exceptional circumstances, for time periods between a charge and a trial in a provincial court without a preliminary inquiry, it would be a maximum of 18 months, and for other cases it would be a maximum of 30 months. Canadian news outlets such as the Vancouver Sun and Toronto Star had noted the ripple effect of this Supreme Court’s decision could mean that “hundreds of financial crime prosecution could be stayed”, all because of court complacency in processing these cases.
As a direct result of R v Jordan, the Ontario Court of Justice at College Park in 2016 had thrown out a prominent criminal fraud case relating to the Toronto Transit Commission employees’ misappropriation of public funds based on the prosecution’s violation of section 11(b) of the Charter due to lengthy delays. As such, prosecutors should be mindful of their inaction could lead to their cases being thrown out. For the side of the accused, the Charter and recent case law provides them a recourse should their cases were not heard within a reasonable timeframe.
Our Fraud Lawyers Can Help!
Criminal charges such as fraud can be complex to the everyday person. Fortunately, our Criminal Lawyers can help you on your best defence and ensuring your rights before prosecution. You can also contact us if the prosecution is using the criminal justice system as a means of debt collection as well. We have a wealth of experience in prosecuting and defending criminal fraud cases. In particular, our team is led by the former Chief Crown Prosecutor in both Alberta and New Brunswick, William Wister, amongst other working professionals. William Wister has over 28 years of experience handling criminal matters and is one of the most experienced lawyers at Shim Law. You can book a consultation with us online, email, or through telephone.
The information provided in this blog does not, and is not intended to be legal advice. Instead, all information available are for general information purposes only. Information on this blog may not constitute the most up-to-date legal or other information. If you are still not sure about your offence, do not hesitate to contact us online, email, or telephone.
