R. v. Steinhubl, 2010 ABQB 602 (CanLII)
A. What is reliance?
[118] Reliance requires proof of action arising from deceit, falsehood or other fraudulent means. Engaging in deceit, the telling of lies or engaging in other fraud alone is insufficient absent evidence that the complainant has taken some action based on those statements or actions.
[119] In other words, not every deceit, lie or fraudulent act constitutes a crime. There is no crime of fraud absent a causal relationship between the dishonesty and some type of deprivation or risk of deprivation. A coincidence of dishonesty and loss is not sufficient: see Douglas Ewart, Criminal Fraud (Toronto: Carswell, 1986) at 105, cited in Brenda L. Nightingale, The Law of Fraud, looseleaf (Toronto: Carswell, 2009) at 5-7.
[120] Reliance was defined by the Ontario Court of Appeal in R. v. Vallillee (1974), 15 C.C.C. (2d) 409 (Ont. C.A.) in upholding a fraud conviction based on the accused having rented a car from Tilden Rent-A-Car using stolen identification and a stolen credit card. The Court stated at 414:
He has been induced to act to his detriment by transferring possession of his property in circumstances in which he would not have done so but for the fraud practiced.
[121] The test for reliance is, therefore, whether the complainant was induced to act to his or her detriment by transferring possession of property, including money, in circumstances in which he or she would not have done so but for the fraud.
[122] This test was again used by the Ontario Court of Appeal in R. v. Knowles reflex, (1979), 51 C.C.C. (2d) 237 at 241 (Ont. C.A.) in finding reliance to have been established based on express evidence from a loans officer that he would not have made the loan had he known that the accused employee was the true purchaser of a franchise. The franchiser had a policy of prohibiting its employees from purchasing franchises for fear of conflict of interest.
[123] Similarly, in R. v. Hilliard (1975), 28 C.C.C. (2d) 566 (Ont. Co. Ct.) [Hilliard], the judge inferred that the elderly victim “was induced to act to her detriment by transferring her property [cash] to the accused in circumstances in which she would not have done so, but for the deceit practiced” (at 576) in convicting the accused of fraud in a house renovation scam. The inference was based upon the evidence of other witnesses that the monies required by the accused were in excess of what was required for materials, as well as the fact of the victim’s age and infirmity.
[124] Reliance was also proven through evidence supporting the inference that the lender would not have advanced mortgage funding had it known the true circumstances in R. v. Wagman reflex, (1981), 60 C.C.C. (2d) 23 (Ont. C.A.) [Wagman], a mortgage fraud case based on facts strikingly similar to the ones in our case. There the fraudster homebuilders entered into agreements with mortgage lenders to obtain mortgages on 13 homes. The lender would advance only 75% of mortgage funding upon completion of each home. The balance became available when that home was sold to a qualified purchaser. The fraudster had straw buyers sign agreements to purchase homes stating they were paying deposits, but none were ever paid. None of these transactions closed. The fraudster nonetheless used these agreements to obtain the balance of the mortgage funds from the lender.
[125] The Ontario Court of Appeal inferred from the manner in which the agreements were obtained and presented to the lender that it would not have advanced the mortgage funds if it had known all of the circumstances (31). The conviction was upheld although the lender suffered no loss, as the fraudster subsequently sold the homes to bona fide purchasers who made the mortgage payments.
[126] In comparison, where money is loaned for reasons totally independent of the fraudulent conduct, reliance is not proven. For example, the Ontario Court of Appeal refused to uphold a fraud conviction arising from the accused having made two false statements on her application for an Eaton’s credit card in R. v. Winning (1973), 12 C.C.C. (2d) 449 (Ont. C.A.) [Winning] because of direct evidence that Eaton’s did not rely on these misrepresentations in deciding to grant her credit.
[127] The Québec Court of Appeal came to a similar decision in R. c. Champagne (1987), 19 Q.A.C. 309 at para. 21 (Que. C.A.) in concluding that fraud had not been made out where a bank granted the accused’s mortgage application on the basis of its own property appraisal evaluation rather than his representation as to the cost of construction.
[128] Courts have also refused to find reliance in cases where the complainant was an undercover law enforcement officer attempting to gain evidence of consumer fraud on the basis that there was no reliance on the misrepresentations because the complainant knew the true state of affairs. In R. v. Lyons, [1910] 16 C.C.C. 152 (Que. Prov. Ct.), the Québec Provincial Court refused to convict a store owner of false advertising where the complainant purchaser bought the product in order to gain evidence, knowing of the falsity of the representation. More recently, in R. v. Timar (1968), 5 C.R.N.S. 195 (Ont. Co. Ct.), reliance was not established where the police laid a trap to obtain evidence of the accused’s bribery scheme seeing as they parted with their money in order to found criminal charges rather than in reliance of the accused’s false representations.
[129] In summary, to prove reliance, the Crown must prove through direct evidence or permitted inference that the accused’s dishonest conduct caused deprivation, i.e., actual loss or at least risk to the victim’s pecuniary interests: see R. v. Théroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5 at 20 (S.C.C.) [Théroux].
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